According to the partial equilibrium model of international trade, in a market for a good in which a country does not have a comparative advantage, free trade will lead to:
A) welfare gains for the country's producers of the good that are greater in absolute value than the losses for domestic consumers of the good.
B) welfare losses for the country's producers of the good that are smaller in absolute value than the gains to domestic consumers of the good.
C) welfare losses for the country's producers of the good that are greater in absolute value the gains to domestic consumers of the good.
D) welfare gains for the country's producers of the good that may be larger than or smaller than the gains to domestic consumers of the good.
E) welfare gains for producers of the good that are exactly equal to the losses to domestic consumers of the good.

Question

Quizplus · Accepted Answer

According to the partial equilibrium model of international trade, free trade leads to an increase in imports of the good in which a country does not have a comparative advantage, which will result in a decrease in the price of the good in the domestic market. Domestic consumers will benefit from lower prices, while domestic producers will face increased competition from foreign producers and may experience a decrease in quantity sold and a lower price. Therefore, there will be welfare losses for the country's producers of the good that are smaller in absolute value than the gains to domestic consumers of the good.

According to the Partial Equilibrium Model of International Trade, in a Market