Assume that Russia has a comparative advantage in vodka.If the United States extends Russia the benefits of the normal-trade-relations (most-favored-nation) principle, U.S.consumer surplus decreases in the vodka market.

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When the United States extends Russia the benefits of the normal-trade-relations (most-favored-nation) principle, it typically reduces tariffs or trade barriers on Russian vodka. Since Russia has a comparative advantage in vodka production, this means it can produce vodka more efficiently (at a lower cost) than the United States. As a result, the supply of vodka in the U.S. market would increase, leading to lower prices for consumers. Lower prices increase consumer surplus, as consumers can either buy the same amount of vodka for less money or more vodka for the same amount of money.

Assume That Russia Has a Comparative Advantage in Vodka