1. In addition to the positive welfare effects that free trade has on an economy

Question

1. In addition to the positive welfare effects that free trade has on an economy, there are a variety of other benefits of international trade. Consider the following scenario:

As a consumer, Susan loves both French cheeses and Italian cheeses. Thanks to free trade, she has the option of purchasing either at her local store.

The previous scenario represents which of the following benefits of free trade?

A. Lower costs through economies of scale

B. Increased competition

C. Increased variety of goods

D. Enhanced flow of ideas

6. The arguments for restricting trade

Suppose there is a policy debate regarding the United States’ imposing trade restrictions on imported semiconductors:

A congresswoman from a state with several semiconductor factories explains that it is necessary to impose trade restrictions, such as a tariff, on the semiconductor industry to protect workers in the domestic semiconductor industry. The congresswoman claims that without trade protection, there will be layoffs, causing many U.S. workers in the semiconductor industry to be unemployed.

Which of the following justifications is the congresswoman using to argue for the trade restriction on semiconductors?

A. Unfair-competition argument

B. Infant-industry argument

C. Jobs argument

D. National-security argument

E. Using-protection-as-a-bargaining-chip argument

Explanation / Answer

1. Option C. Increased variety of goods

Explanation: Free trade increases the availability of various types of goods in the domestic market. Therefore, domestic consumers get access to different varieties of goods.

6. C. Jobs argument

Explanation: The congresswoman thinks free-trade is causing job loss in the semiconductor industry in the USA. So, this is a jobs argument.

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