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Chapter 9

Chapter 9 - International Trade

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Department
Economics
Course
Economics 10a
Professor
Gregory Mankiw
Semester
Fall

Description
Chapter 9: International Trade The Determinants of Trade ­ without trade, price adjusts to balance domestic supply and demand ­ world price: price prevailing in world markets ­ if the domestic price is lower than the world price, the country will be an exporter ­ if the domestic price (opportunity cost) is low, the country has a comparative  advantage The Winners and Losers from Trade ­ countries with small economies are price takers because their trade policies do not  affect the world price  ­ when a country becomes an exporter of a good, domestic producers of the good  are better off, and domestic consumers of the good are worse off ­ when a country becomes an importer of a good, domestic consumers of the good  are better off, and domestic producers of the good are worse off ­ trade raises the economic well­being of a nation in the sense that the gains of the  winners exceed the losses of the losers ­ trade can make everyone better off, but gains usually divided unequally ­ tariff: tax on imported goods, raises price of imported textiles above world price ­ tariff reduces the quantity of imports and moves the domestic market closer to its  equilibrium without trade ­ consumer surplus decreases, producer surplus increases, government revenue  i
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