Question

1. The principle of comparative advantage asserts that a. not all countries can benefit from trade with other countries. b. the world price of a good will prevail in all countries, regardless of whether those countries allow international trade in that good. c. countries can become better off by exporting goods, but they cannot become better off by importing goods. d. countries can become better off by specializing in what they do best. 2. Assume, for Canada, that the domestic price of tomatoes without international trade is higher than the world price of tomatoes. This suggests that, in the production of tomatoes, a. Canada has a comparative advantage over other countries and Canada will export tomatoes. b. Canada has a comparative advantage over other countries and Canada will import tomatoes. c. other countries have a comparative advantage over Canada and Canada will export tomatoes. d. other countries have a comparative advantage over Canada and Canada will import tomatoes. 3. Trade enhances the economic well-being of a nation in the sense that a. both domestic producers and domestic consumers of a good become better off with trade, regardless of whether the nation imports or exports the good in question. b. the gains of domestic producers of a good exceed the losses of domestic consumers of a good, regardless of whether the nation imports or exports the good in question. c. trade results in an increase in total surplus. d. trade puts downward pressure on the prices of all goods.

No need to explain in detail. I just want to check my answer. But please provide me a formula.

Answer 1

Answer 1. countries can become better off by specializing in what they do best

Reason- Trade between nations takes place on the basis of comparative advantage. Country which can produce a good at lower opportunity cost than other countries will export the good.

Answer 2. other countries have a comparative advantage over Canada and Canada will import tomatoes.

reason- World price is lower than Canadian price, it means other countries have comparative advantage.

Answer 3. trade results in an increase in total surplus

Reason- Import reduces producer surplus, increases consumer surplus and Export reduces consumer surplus, increases producer surplus. In both cases decrease is less than increase. So overall total surplus always increases

Answer 4. Scotland has comparative advantage in producing wool, relative to the rest of the world.

Reason- As World price is more than domestic price for wool.

Answer 5. export 65 basket

reason- export=Supply - Demand at world prices

Export= 105-40=65

Answer 6 Import 400 carnations

reason- Before tariff, world prices will prevail.

Import= Demand- supply at world price

Import= 500-100=400

Note-According to HOMEWORKLIB RULES first four parts can be answered