Question 1

A logical starting point from which the study of international trade begins is&#10;A)the recognition that not all markets are competitive.&#10;B)the recognition that government intervention in markets sometimes enhances the economic welfare of the society.&#10;C)the principle of absolute advantage.&#10;D)the principle of comparative advantage.

Accepted Answer

The principle of comparative advantage is a fundamental concept in international trade that explains why countries specialize in producing goods where they have a lower opportunity cost and trade with other countries. This principle provides a logical starting point for understanding the gains from trade and the distribution of benefits among trading partners. Options A and B are related to market failure and government intervention, which are important factors in international trade but not the starting point. Option C is also related to specialization and trade but is a weaker and more limited concept than comparative advantage.

Question 2

Which of the following is not an important question for economic policy raised by the experience of the textile industry?&#10;A)How does international trade affect consumer well-being?&#10;B)Who gains and who loses from free trade among countries?&#10;C)How do the gains from trade compare to the losses?&#10;D)Which argument for restricting free trade is politically feasible?

Accepted Answer

While all of the other questions are important for economic policy related to the textile industry, the question of which argument for restricting free trade is politically feasible is more of a question related to political science than economics. While it may impact economic policy, it is not directly related to the economic effects of the textile industry.

Deck 9: 0: Sec 90 Mc Application International Trade