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Chapter 20: Q. 36 (page 490)

Why is trade a good thing if some people lose?

Short Answer

Expert verified

Trade is a good thing if some people lose because it benefits the economy in the long run and increases the competition in the economy.

Step by step solution

01

Step 1. Meaning of international trade.

International trade refers to the exchange of goods and services between two countries at a fixed exchange rate.

02

Step 2. Reason for trade is a good thing.

Trade is a good thing if some people lose because it benefits the economy in the long run and increases the competition in the economy. Domestic producers lose from international trade but it improves the standard of living and hence the long-term economic growth.

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Most popular questions from this chapter

Why is the national security argument not convincing?

How would direct subsidies to key industries be preferable to tariffs or quotas?

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?

Who gains and who loses from trade?

Why might a tax on domestic consumption of resources critical for national security be a more efficient approach than barriers to imports?
See all solutions

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