Answer to Question #257776 in Microeconomics for AD37

Question

1. The country Autarka does not allow international trade. In Autarka, you can buy a wool suit for 100 grams of gold. Meanwhile, in neighboring countries, you can buy the same suit for 60 grams of gold. If Autarka were to allow free trade, would it import or export suits? Why? /1

2. What does the domestic price that prevails without international trade tell us about a nation’s comparative advantage? /1

3. When does a country become an exporter of a good? An importer? /1

4. Describe what a tariff is and describe its economic effects. /1

5. List five arguments often given to support trade restrictions. How do economists respond to these arguments? /2

Answer 1

1.Autarka would import the suits because they are cheaper in other countries.

2.the country has a higher comparative advantage

3.if a country lacks a good it will import it,if it produced plenty goods,it will export it

4.tariff is tax on import and export. Tariff reduce profit

5.

the protection of domestic jobs, national security, the protection of infant industries, the prevention of unfair competition, and the possibility to use the restrictions as a bargaining chip