2. Winners and losers from free trade Consider the market for meekers in the ima

Question

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 meekers is $25. Suppose that the world price of meekers is $30. Assume that Meekertown is too small to influence the world price of meekers once it enters 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 Meekertownian consumers are better off under free trade than they were before. O Meekertownian producers are worse off under free trade than they were before. O True False True or False: When a country is too small to affect the world price, allowing free trade will never increase total surplus in that country, regardless of whether it imports or exports as a result of international trade. True O False

Explanation / Answer

In case of free trade, Meekertown will export meekers because domestic price is less than world price

Consumers are not better off because price is increased so their surplus is reduced. FALSE

Producers are better off because their surplus is higher. FALSE

The last statement is FALSE because when a country is small and it accepts the world price, free trade increases net welfare

Related Questions

Navigate

• Browse (All)
• Browse 2
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.