Question

Which of the following statement is INCORRECT about international trade?

Any trade barrier such as tariff or quota decreases the welfare of import country.

The key gain from trade is that both countries can consume outside their PPF.

When a country’s currency depreciates, the country’s exports will increase in the short run.

When a developing country trades with a developed country, the former always benefits but the later may or may not benefit.

2.

Which of the following explains the total world output increase as a result of trade?

		Specialization in production.
		Imported technologies.
		High tech exports.
		Law of demand.

Answer 1

1) Any trade barrier such as tariff or quota decreases the welfare of import country.

(Tariff barriers are specially taxes that put on the imported goods and raise their prices relative to domestic goods. It's give the domestic products protection in the market and reduce the chance of dumping. So, trade barriers somehow increases the welfare of the import country)..

2) Specialization in production..

(As the total world output increases because of trade, there will be comparative advantage applies to individuals, companies, states, and nations. So, there will be specialization in production)...

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