Should international transportation costs decrease,the effect on international trade would include:
A) An increase in the volume of trade
B) A smaller gain from trade
C) A decline in the income of home producers
D) A decrease in the level of specialization in production.

Question

Quizplus · Accepted Answer

If international transportation costs decrease, it becomes less expensive to transport goods between countries. This would naturally result in an increase in the volume of trade since the cost of transporting goods is one of the major determinants of the level of trade. With lower transportation costs, exporters will be able to sell their goods at lower prices while still making a profit. This will increase demand for the products, and more goods will be traded resulting in an increase in the volume of international trade.

Should International Transportation Costs Decrease,the Effect on International Trade Would