CAS EC 101 Chapter Notes -Predatory Pricing, Social Insurance, Game Theory

• School: Boston University
• Department: Economics
• Course: CAS EC 101
• Professor: Michael Manove

Document Summary

If world price is higher than domestic price, nation will export. Low domestic price means that the cost of production is low. Small economies on the world stage are price takers. 9-2a the gains and losses of an exporting country. No seller will accept less than world price. Domestic price might rise if world price is higher. When there is more that the country can supply than is domestically demanded, it exports. Trade raises economic well-being of a nation- gains from winners exceed losses of losers. 9-2b the gains and losses of an importing country. Domestic producers are worse off with smaller surplus. Total surplus increases- gains of the winners is more than the losses of the losers. Creates a deadweight loss that overall makes the nation worse off. Import quotas are another way to restrict trade. Reduces the amount of imports to increase domestic production.