The Introduction of Decreasing Costs into the Theory of Comparative

question 13

Multiple Choice

The introduction of decreasing costs into the theory of comparative advantage:

• A)makes it possible for trade to be mutually advantageous even if there are no pre-trade differences in comparative costs between two countries.
• B)reduces the gain from international trade.
• C)means, unlike the constant-cost case, that specialization will probably not be complete.
• D)may be an interesting theoretical abstraction, but has little relevance in explaining why specialization and trade have, in fact, occurred.
• E)would explain none of the above.

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