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1. "In times of financial instability or wars, countries tend to revert back to protectionism." Explain why.

2. Should absolute advantage be the basis for trade? Explain your answer, using the definitions of absolute and comparative advantage.

3. Many people argue that because wages are much lower in China, U.S. should not trade with China because that would hurt the U.S. economy. What is the fallacy of this argument? Explain using the Ricardian model.

4. Ireland's bilateral trade with the U.S. is much larger than what the Gravity model would predict. Can you give an explanation for this?

5. It is often seen that between two trading partners, one country (typically the developing country) has lower wages than the other country (typically the developed country). Does that mean that the developing country should simply stop trading to improve its wages? Explain using the Ricardian model.

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