1. According to David Ricardo, comparative advantage is determined by:
A. exchange rate.
B. net exports.
C. labor productivity.
2. Three countries operate within a free trade area. One country proposes moving to a customs union structure. What additional level of economic integration between the countries would most likely arise if this change took place? They would:
A. establish common trade barriers against non-members.
B. begin to allow free movement of the factors of production.
C. establish common economic institutions and coordination of economic policies.
3. The World Trade Organization most likely:
A. provides low interest rate loans to developing countries.
B. lends foreign currency on a temporary basis to address balance of payment issues.
C. provides a major institutional and regulatory framework of global trade rules.