Reference no: EM132303044

PART A (True, False or Uncertain Questions) Answer the following questions true false or uncertain and explain your answers.

Question 1. In the simple Ricardian model, when two countries decide to move from Autarky to Free Trade residents of the two countries are made better off as a result of free trade.

Question 2. Movement of labor from China to the United States reduces the marginal physical product of labor in China and increases the marginal physical product of labor in the United States.

Question 3. American workers gain from free trade with China because free trade lowers prices of manufactured goods in the United States and American workers spent very large portion of their income on manufactures.

Question 4. According to the Specific Factors and Heckscher-Ohlin models if an economy gains through free trade, then everyone automatically gains from trade.

Question 5 Preferential trade agreements are welfare improving if they lead to trade creation.