Which of the following is correct? i. Australian total surplus decreases when Australia exports a good.
Ii) Australian total surplus decreases when Australia imports a good.
Iii) Australian total surplus increases when Australia imports a good and when it exports a good.
A) i and ii
B) ii only
C) iii only
D) i only
E) None of the above because the Australian total surplus does not change as a result of trade.

Question

Quizplus · Accepted Answer

iii) is correct because when a country exports goods, it benefits from receiving money from other countries, and when it imports, consumers benefit from access to goods they might not produce domestically or can get cheaper or of better quality from abroad. Both actions can increase the total surplus by allowing the country to specialize in the production of goods for which it has a comparative advantage and to benefit from economies of scale, thus improving overall economic welfare.

Which of the Following Is Correct? I