The Ricardian Model of Comparative Advantage Lends Support to the Argument

question 8

Multiple Choice

The Ricardian model of comparative advantage lends support to the argument that

• A) trade tends to worsen the conditions of unskilled labor in rich countries.
• B) trade tends to worsen the conditions of owners of capital in rich countries.
• C) trade tends to worsen the conditions of workers in poor countries.
• D) trade tends to worsen the conditions of workers in rich countries.
• E) trade is mutually beneficial to the countries that engage in it.

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Definitions:

AVC Curve

Stands for Average Variable Cost Curve, a graphical representation that shows the average variable costs of production at different levels of output.

ATC Curves

The graphical representation of the relationship between average total costs and output levels in the short run for a firm.

Diseconomies of Scale

Diseconomies of scale occur when a business expands to the point where the costs of managing and coordinating operations increase, leading to a rise in the average costs.

Economies of Scale

Cost advantages reaped by companies as a result of scale of operation, leading to a reduction in the per-unit cost of production.