A product is produced in a monopolistically competitive industry with scale economies. If this industry exists in two countries, and these two countries engage in trade with each other, then we would expect
A) each country will export different varieties of the product to the other.
B) the country in which the price of the product is lower will export the product.
C) the country with a relative abundance of the factor of production in which production of the product is intensive will export this product.
D) neither country will export this product since there is no comparative advantage.
E) the countries will trade only with other nations they are not in competition with.
Question 2
The proposal that trade agreements should include a system which monitors worker conditions and make the results available to consumers in the rich importing country
A) is consistent with the Invisible Hand paradigm.
B) is consistent with the market failure approach.
C) is consistent with the Ricardian theory of comparative advantage.
D) is consistent with the scale economies approach to trade theory.
E) is consistent with the principles laid out by the WTO.
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