When transportation costs are added to our trade model, the low-cost exporting country produces less, consumes more, and exports less than that which occurs in the absence of transportation costs.

Question

Quizplus · Accepted Answer

This statement is correct. When transportation costs are added to the trade model, the exporting country would produce less as it becomes more expensive to export goods. They would also consume more domestically as exporting becomes less profitable. This results in a decrease in exports from the exporting country.

When Transportation Costs Are Added to Our Trade Model, the Low-Cost