2. Winners and losers from free trade
Consider the market for meekers in the imaginary economy of Meekertown. In the absence of international trade, the domestic price of a meeker is $21. Suppose that the world price for a meeker is $22. Assume that Meekertown is too small to influence the world price for meekers once they enter the international market.
If Meekertown allows free trade, then it will meekers.
Given current economic conditions in Meekertown, complete the following table by indicating whether each of the statements is true or false.
Statement
True
False
Meekertownian consumers are worse off under free trade than they were before. Meekertownian producers are worse off under free trade than they were before.
True or False: When a country is too small to affect the world price, allowing for free trade will always increase total surplus in that country, regardless of whether it imports or exports as a result of international trade.
True
False
2. Winners and losers from free trade
Consider the market for meekers in the imaginary economy of Meekertown. In the absence of international trade, the domestic price of a meeker is $21. Suppose that the world price for a meeker is $22. Assume that Meekertown is too small to influence the world price for meekers once they enter the international market.
If Meekertown allows free trade, then it will meekers.
Given current economic conditions in Meekertown, complete the following table by indicating whether each of the statements is true or false.
| Statement | True | False | |
|---|---|---|---|
| Meekertownian consumers are worse off under free trade than they were before. | |||
| Meekertownian producers are worse off under free trade than they were before. |
True or False: When a country is too small to affect the world price, allowing for free trade will always increase total surplus in that country, regardless of whether it imports or exports as a result of international trade.
True
False
Related textbook solutions
Related questions
1. If we know that Canada exports maple syrup, we can conclude that maple syrup consumers in Canada are worse off than they would be in the absence of trade.
Is the statement true or false?
2. When a country opens up to trade in a good for which it has a comparative advantage, and the country begins to export the good, we can conclude that:
| a. |
The domestic price will fall after trade opens up. |
|
| b. |
The total surplus for this good will increase as a result of opening up the market to international trade. |
|
| c. |
Opening the market to international trade will create a deadweight loss. |
|
| d. |
Both buyers and sellers in that country will be better off as a consequence of opening up the market to international trade. |
