Explanation International trade is the exchange of goods and services between different nations in the world. The exchange will take place where the two main processes are exports and imports. Exports are the sale of domestic goods to the foreigners and imports are the purchase of foreign goods by the domestic country. Consumer surplus can be explained as the difference between the highest price that the consumer is willing to pay and the actual price that the consumer pays. The difference between these two prices is known as the surplus to the consumer. The producer surplus is the difference between the minimum willing to accept price of the seller and the actual price that the seller receives for the commodity. When there is international trade, the domestic price level will give way to the international price level and thus, the firms that produce commodities with the lowest opportunity cost will be benefited and the others will be hurt. Thus, there are some main arguments against international trade and they are as follows: (1) The importing of goods from the foreign countries at a lower rate will destroy the employment sector of the domestic market. As a result of the lower priced foreign goods, the employment in the domestic sector will fall due to higher costs; it is harmful to the domestic economy. (2) Imports will destroy the industries which may be vital for the domestic economy. Thus, for the growth of the domestic economy, importing should not be allowed. (3) The new industries in the domestic market are starting to grow and they need protection in order to become strong and compete against the strong, international competitors...

The arguments in favor of and against the trade restrictions.

EBK PRINCIPLES OF MACROECONOMICS

7th Edition

ISBN: 8220102749566

Author: Mankiw

Publisher: CENGAGE L

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Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 9, Problem 5QR

To determine