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The Small Country General Equilibrium (PPF/indifference Curve Model) of International

Question 16

Multiple Choice

The small country general equilibrium (PPF/indifference curve model) of international trade brought out a number of important points, among which is/are:


A) After international trade is carried out to its fullest potential, domestic prices will become lower than international prices.
B) The gains from exchange are the result of domestic consumers substituting relatively cheaper foreign products for more expensive domestic products.
C) The shift from self-sufficiency to free trade decreases the economy's real output but it lowers the prices of everything so that it seems as though real income increases.
D) All of the above.
E) None of the above.

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