ECON 201 Chapter 9
Refer to Figure 9-9. Consumer surplus in this market after trade is
A
Refer to Figure 9-9. Producer surplus in this market after trade is
B + C + D.
Refer to Figure 9-9. The change in total surplus in this market because of trade is
D, and this area represents a gain in total surplus because of trade.
A quota is
a limit on the quantity of imports
For any country, if the world price of copper is lower than the domestic price of copper without trade, that country should
import copper
A logical starting point from which the study of international trade begins is
the principle of comparative advantage.
Refer to Figure 9-1. When trade in coffee is allowed, consumer surplus in Guatemala
is A, decreased by the area B + D.
The infant-industry argument
is based on the belief that protecting industries when they are young will pay off later.
Refer to Figure 9-1. In the absence of trade, total surplus in Guatemala is represented by the area
A + B + C + D + F
A tariff is a tax placed on
an imported good and consumers pay higher price of the good than the world price.
For any country, if the world price of copper is higher than the domestic price of copper without trade, that country should
export copper, since that country has a comparative advantage in copper.
Refer to Figure 9-9. Total surplus in this market after trade is
A + B + C + D.