1. An examination of the Ricardian model of comparative advantage yields the clear result that trade is (potentially) beneficial for each of the two trading partners since it allows for an expanded consumption choice for each. However, for the world as a whole the expansion of production of one product must involve a decrease in the availability of the other, so that it is not clear that trade is better for the world as a whole as compared to an initial situation of non-trade (but efficient production in each country). Are there in fact gains from trade for the world as a whole?
2. What is paradoxical about the results of Leontief's test of the Heckscher-Ohlin model?
3. Laxland and Workland are two identical countries except that people in Workland work twice as hard of those in Laxland. Under all the usual HO assumptions what would be your prediction of the patterns of trade between these two countries?
4. According to former US President Bill Clinton, "Each nation is like a big corporation competing in the global marketplace." Explain how this may be true in regards to trade and how it may not be true.