QUESTIONS FOR REVIEW

1. What does the domestic p.ice that prevails without international trade tell us about a nation’s comparative advantage?

2. When does a country become an exporter of a good? An importer.

3. Draw the supply-and-demand diagram for an exporting country. What is consumer surplus and producer surplus before trade is allowed? What is consumer surplus and producer surplus with free trade What is the change in total surplus?

4. Describe what a tariff is and its economic effects.

5. List five arguments often given to support trade restrictions. How do economists respond to these arguments?

6. What is the difference between the unilateral and multilateral approaches to achieving free trade? Give an example of each.

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