Textbook Examples of Trade Between Two Nations Are Simplified in Order

question 61

Multiple Choice

Textbook examples of trade between two nations are simplified in order to show how two nations both benefit from trade.These examples are misleading because

• A)in the real world,rich countries can take advantage of poor countries.
• B)they do not account for the reduction in wages that occurs in both countries as a result of trade.
• C)some individuals in both countries may be made worse off because of trade.
• D)trade restrictions are likely to be imposed as trade grows over time.

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Definitions:

Equilibrium Price

The market price at which the quantity of goods supplied equals the quantity of goods demanded.

Equilibrium Quantity

The amount of products or services available matches the amount requested at the prevailing market rate.

Demand Increases

A situation where the desire and ability to purchase goods and services in a market rise, often leading to higher prices if supply remains constant.

Supply Decreases

A reduction in the quantity of a good or service that producers are willing to sell at a given price, often resulting in higher prices.