Author Question: If two countries engage in Free Trade following the principles of comparative advantage, then A) ... (Read 39 times)

mrsjacobs44 · **on:** Jun 30, 2018

If two countries engage in Free Trade following the principles of comparative advantage, then

A) neither relative prices nor relative marginal costs (marginal rates of transformation-MRTs) in one country will equal those in the other country.
B) both relative prices and MRTs will become equal in both countries.
C) relative prices but not MRTs will become equal in both countries.
D) MRTs but not relative prices will become equal in both countries.
E) trade will be unrestricted, regardless of relative costs and MRTs.

Question 2

The high correlation between rapid growth in exports and rapid economic growth observed in several East Asia countries in recent decades

A) proves that export promoting trade policy leads to relatively rapid economic growth.
B) proves that a free-trade orientation of trade policy results in rapid economic growth.
C) proves that exports help growth, whereas imports impede growth.
D) proves that trade policy is the most important policy area for promotion of economic development.
E) does not prove that trade liberalization always leads to rapid economic growth.