1. Under Smith's theory of international trade a country will completely specialize in the good it has an absolute advantage in producing.

A) True

B) False

2. According to Ricardo the immediate basis for trade stems from _________________ cost differences between nations.

A) absolute

B) comparitive

3. If in a two-nation, two-product world Country A uses more labor to produce both goods than Country B we say that Country A

A) has an absolute disadvantage in both goods

B) has an absolute advantage in both goods

C) will not participate in international trade

D) will import both goods from Country B