The Simple Comparative Advantage Model Assumes That Trade Does Not

question 48

Multiple Choice

The simple comparative advantage model assumes that trade does not change a country's stock of resources or their utilization efficiency.If we relax this assumption to make allowances for dynamic changes,all of the following become apparent except:

• A)opening the economy to trade would be likely to generate dynamic gains.
• B)free trade may increase the country's stock of resources.
• C)free trade might increase the efficiency with which the country uses its resources.
• D)dynamic gains will cause the country's PPF to shift inward.

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