Lesson 4: Comparative Advantage, Profits & Wages 

Please read Chapters 13-17 in Protection or Free Trade and "Comparative Advantage"

1. If Country A produced all things better than Country B,

a. Country B's debt to Country A would tend to increase.
b. corporations would move production facilities out of country B and into Country A.
c. unless there were a bilateral trade pact, no trading would take place between them.
d. both nations could benefit from international trade.
e. neither nation could benefit from international trade.

2. On which group does a nationís protective tariffs have a greater negative effect: its own citizens, or those in countries that wish to trade with them?   (Chp. 12) 

3. What is the effect of legislative encouragement or restriction of any one industry on the production of wealth?   (Chp. 13) 

4. In which industries do protective tariffs result in greater profits? Give examples.   (Chp. 14) 

5. Is the aim of protection to lessen competition in the labor market or in the goods market?   (Chp. 12) 

6. What is the effect of protection on prices and on wages?   (Chp. 14) 

7. How can wages be raised briefly and in a small way by tariffs?   (Chp. 14) 

8. What determines the general level of wages?   (Chp. 14) 

9. The average level of wages in an economy

a. equals the marginal wage level.
b. is raised by protective tariffs.
c. is higher than the marginal wage level.
d. is determined by the margin of production.

10. Would it be unjust to abolish protection all at once? Explain.   (Chp. 15) 

11. What is the general tendency of free trade?

12. What is the general tendency of protection?

13. From what fact does protection, in spite of its fallacies, draw its greatest strength?   (Chp. 17) 

14. The productivity of labor is enhanced by

a. patriotism, temperance and high moral standards.
b. raising the average level of education.
c. free trade.
d. All of the above.
f. a and b, but not c.