Canada is both an importer and an exporter of cars. If Canada exports more cars than it imports and the price of cars rises, then ceteris paribus, Canada's terms of trade... O a. Deteriorates because the gain in imports more than offsets the loss of exports. o b. Remains the same because the index of export prices rises by the same amount as the index of import prices. O c. Improves because the index of export prices rises and the index of import prices falls. o d. Improves because the index of export prices rises more than the index of import prices. O e. Deteriorates because of the loss of exports that would result.

Canada is both an importer and an exporter of cars. If Canada exports more cars than it imports and the price of cars rises, then ceteris paribus, Canada's terms of trade... O a. Deteriorates because the gain in imports more than offsets the loss of exports. o b. Remains the same because the index of export prices rises by the same amount as the index of import prices. O c. Improves because the index of export prices rises and the index of import prices falls. o d. Improves because the index of export prices rises more than the index of import prices. O e. Deteriorates because of the loss of exports that would result.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that one country (Country A) subsidizes its exports and the other country (Country B) imposes a "countervailing" tariff that offsets its effect, so that in the end relative prices in the second country are unchanged. What happens to the terms of trade? What about welfare in the two countries? O A. From Country A's perspective, world relative supply will increase and world relative demand will increase. This will improve its terms of trade. The countervailing tariff exacerbates this effect so Country A will definitely gain and Country B definitely loses. O B. From Country A's perspective, world relative supply will decrease and world relative demand will increase. This will improve its terms of trade. The countervailing tariff exacerbates this effect so Country A will definitely gain and Country B definitely loses. C. From Country A's perspective, world relative supply will decrease and world relative demand will increase. This will worsen its terms of trade. The countervailing…
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A country that produces paper is a price taker in the world paper market. The world price is pw: Suppose that the industry is not polluting. onor The domestic supply curve, S, is upward sloping, but the home country can nti import as much as it wants at the world price, pw. In the free-trade equilibrium, e1, the equilibrium quantity is Q, and the equilibrium price is the world price, pw- With a ban on imports, the equilibrium is e2, quantity falls to Q2, and price rises to P2 P2 How do we know that winners from trade can compensate losers and still have enough left over to benefit themselves? mes The winners from trade can compensate the losers and still have enough left over to benefit themselves because, with free trade, O A. consumer surplus increases by more than producer surplus decreases. Q2 Q1 Q, Tons per year O B. consumer surplus increases by more than deadweight loss increases. O C. producer surplus increases by more than consumer surplus decreases. O D. producer surplus…
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