Question

In: Economics

TRUE/FALSE When a country allows free trade of a good, if the world price is higher...

TRUE/FALSE

When a country allows free trade of a good, if the world price is higher than the domestic price

TRUE/FALSE

If a country’s domestic price of a good is lower than the world price, then that country has a comparative advantage in producing that good.

TRUE/FALSE

When a country that imports shoes imposes a tariff on shoes, buyers of shoes in that country become worse off

TRUE/FALSE.

If a small country imposes a tariff on an imported good, domestic sellers will gain producer surplus, the government will gain tariff revenue, and domestic consumers will gain consumer surplus.

Solutions

Expert Solution

1. If the world price is higher than the domestic price then the country would export the goods. Hence, this statement is False as the country would not engage in free trade in this case.

2. TRUE. If the domestic price is lower than the world price then the country would export the good and the country would export the good in which it has a comparative advantage.

3. TRUE. When country that imports shoes impose a tariff on it, then the price of the shoes in the country goes higher so consumers are worse off and the Government earns its revenue also.

4. FALSE. As prices increase after the import tariff then the domestic consumers will lose consumer surplus.

Rahul Sunny answered 2 years ago
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