A trade cost is an extra cost incurred as a result of buying or selling a good abroad rather than domestically. This extra cost can come from transportation fees, tariffs, and other fees associated with international trade. It should not be confused with the price of the good itself, which is not a trade cost.

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A Trade Cost Is

Question 21

Multiple Choice

A trade cost is:

A) the price of a good that is bought or sold abroad.
B) the cost associated with producing a good that is bought or sold abroad.
C) an extra cost incurred as a result of buying or selling a good abroad rather than domestically.
D) the difference in price between a good that is bought or sold abroad rather than domestically.

Correct Answer: