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Chapter 20: Q. 25 (page 490)

How is international trade, taken as a whole, likely to affect the average level of wages?

Short Answer

Expert verified

Increases.

Step by step solution

01

Step1. Introduction

International trade is the exchange of goods and services across the global/international borders. It refers to the free trade across countries.

It accumulates trade wealth and gains, further enhancing the production due to capital accumulation. All of it induces production as a whole, thereby increasing the number of jobs and demand for labor.

02

Step2. Explanation

As the production demand increases, it shall create demand for labor, thereby creating job opportunities.

When the demand for labor rises, and the supply more or less being the same, the wage rate shall go up.

Hence, international trade increases the average wage rates.

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Most popular questions from this chapter

You have just been put in charge of trade policy

for Malawi. Coffee is a recent crop that is growing

well and the Malawian export market is developing. As such, Malawi coffee is an infant industry. Malawi coffee producers come to you and ask for tariff protection from cheap Tanzanian coffee. What sorts of policies will you

enact? Explain.

Who gains and who loses from trade?

The country of Pepper land exports steel to the Land of Submarines. Information for the quantity demanded (Qd) and quantity supplied (Qs) in each country, in a world without trade, are given in Table.

Price\(Qd
Qs
60230180
70200200
80170220
90150240
100140250

Table 20.6 Pepper land

Price\)Qd
Qs
60430
310
70420330
80410360
90400400
100390440

Table 20.7 Land of Submarines

a. What would be the equilibrium price and quantity in each country in a world without trade? How can you tell?

b. What would be the equilibrium price and quantity in each country if trade is allowed to occur? How can you tell?

c. Sketch two supply and demand diagrams, one for each country, in the situation before trade.

d. On those diagrams, show the equilibrium price and the levels of exports and imports in the world after trade.

e. If the Land of Submarines imposes an antidumping import quota of 30, explain in general terms whether it will benefit or injure consumers and producers in each country.

f. Does your general answer change if the Land of Submarines imposes an import quota of 70?

From the Work It Out "Effects of Trade Barriers," you can see that a tariff raises the price of imports. What is interesting is that the price rises by less than the amount of the tariff. Who pays the rest of the tariff amount? Can you show this graphically?

Why is trade a good thing if some people lose?
See all solutions

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