[ECON 10A] - Final Exam Guide - Comprehensive Notes for the exam (24 pages long!)
1 Dec 2016
School
Department
Course
Professor
Document Summary
A high domestic price indicates that the rest of the world has a comparative advantage in producing the good and that the country will become an importer. The arguments for restricting trade: the jobs argument, etc, some economists worry about the impact of trade on the distribution of income. Even if free trade enhances efficiency, it may reduce equality: there are various arguments for restricting trade: protecting jobs, defending national security, helping infant industries, preventing unfair competition, and responding to foreign trade restrictions. Although some of those arguments have merits in some cases, economists believe that free trade is usually the better policy. In the presence of a positive externality, the social value of the good exceeds the private value. If an activity yields positive externalities, such as technology spillovers, the socially optimal quantity is greater than the equilibrium quantity.
