Without trade restrictions the price of tennis shoes is $30, and with trade restrictions the price of tennis shoes is $45. The difference in the two prices reflects:

Question

Quizplus · Accepted Answer

The difference in prices reflects the value of the extra resources for domestic production of an additional pair of tennis shoes. With trade restrictions, domestic producers have to produce more shoes using their resources, which are less efficient at producing shoes than foreign producers, leading to a higher price for the product. Therefore, the price difference reflects opportunity cost or the value of resources used in domestic production. It does not reflect per-unit profits or gain in consumer surplus from free trade.

Without Trade Restrictions the Price of Tennis Shoes Is $30