Gains From Trade

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International Trade > Gains from Trade
Gains from Trade

Exports: The Economic Impacts of Selling Goods to Other Countries
Imports: The Economics Impacts of Buying Goods from Other
Countries
Costs of Trade
www.boundless.com/economics
Exports: The Economic Impacts of Selling Goods to Other

Countries
Export is defined as the act of shipping goods and services out of the port of a
country.
Legal restrictions and trade barriers are in place internationally to control trade,
whether goods are being exported or imported.
When legal restrictions and trade barriers are lessened or lifted the producer
surplus increases and so does the amount of the goods and services that are
exported from the country.
Exporting allows a country's producers to gain ownership advantages and
develop low-cost and differentiated products.
Due to an extra layer in the chain of distribution which squeezes the margins,
exporters may have to offer lower prices to the importers than to domestic
wholesalers in order to move their product and generate business.
Exports
View on Boundless.com
www.boundless.com/economics/textbooks/boundless-economics-textbook/international-trade-31/gains-from-trade-125/exports-the-economic-impacts
-of-selling-goods-to-other-countries-496-12592
Imports: The Economics Impacts of Buying Goods from Other

Countries
Imports are defined as purchases of good or services by a domestic economy
from a foreign economy.
Protectionism is the economic policy of restraining trade between countries
through tariffs on imported goods, restrictive quotas, and government regulations.
In most countries, international trade and importing goods represents a significant
share of the gross domestic product (GDP).
International trade is generally more expensive than domestic trade due to
additionally imposed costs, taxes, and tariffs.
On a business level, companies take part in direct-imports; a major retailer
imports goods from an overseas manufacturer in order to save money.
Imports
www.boundless.com/economics/textbooks/boundless-economics-textbook/international-trade-31/gains-from-trade-125/imports-the-economics-impac
ts-of-buying-goods-from-other-countries-497-12593
Costs of Trade
Free trade eliminates export tariffs, import quotas, and export quotas; all of which
cause more losses than benefits for a country.
With free trade in place the producers in exporting countries and the consumers
in importing countries all benefit.
One of the main disadvantages is the selective application of free
trade.Economic inefficiency can be created through trade diversion.
Trade restricts displaces workers, makes overcoming unemployment challenging,
increases economic inequality, and can lower wages.
When free trade is applied to only the high cost producer it can lead to trade
diversion and a net economic loss.
Another disadvantage is that by increasing returns to scale, can cause certain
industries to settle in an geographically area where there is not comparative
advantage.
Tariffs
www.boundless.com/economics/textbooks/boundless-economics-textbook/international-trade-31/gains-from-trade-125/costs-of-trade-498-12594
Appendix
International Trade
Key terms
export Any good or commodity, transported from one country to another country in a legitimate fashion, typically for use in
trade.
free trade International trade free from government interference, especially trade free from tariffs or duties on imports.
import To bring (something) in from a foreign country, especially for sale or trade.
protectionism A policy of protecting the domestic producers of a product by imposing tariffs, quotas or other barriers on
imports.
tariff A system of government-imposed duties levied on imported or exported goods; a list of such duties, or the duties
themselves.
trade Buying and selling of goods and services on a market.
trade Buying and selling of goods and services on a market.
welfare Health, safety, happiness and prosperity; well-being in any respect.
International Trade
Exports
The map shows the primary exporters for countries around the globe.The colors indicate the leading merchandise export destination for the indicated
country (the United States main export destination is the European Union).Exporting is the act of shipping goods and services to other countries.
Wikipedia. "Key export markets." CC BY-SA http://en.wikipedia.org/wiki/File:Key_export_markets.png View on Boundless.com
International Trade
Imports
The map shows the largest importers on an international scale.The color indicates the leading source of merchandise imports for the indicated country
(the United States' imports the largest percentage of its goods from China).Imports account for a significant share in the gross domestic product (GDP)
of a country.
Wikipedia. "Key import sources." CC BY-SA http://en.wikipedia.org/wiki/File:Key_import_sources.png View on Boundless.com
International Trade
Tariffs
This image shows what happens to societal welfare when free trade is not enacted.Tariffs cause the consumer surplus (green area) to decrease, while
the producer surplus (yellow area) and government tax revenue (blue area) increase.The amount of societal loss (pink area) is larger than any benefits
experienced by the producers and government.Free trade does not have tariffs and results in net gain for society.
Wikipedia. "EffectOfTariff." CC BY-SA http://en.wikipedia.org/wiki/File:EffectOfTariff.svg View on Boundless.com
International Trade
Assume that France lifts trade barriers that prevented wine

makers from exporting wine. What would you expect to happen?
A) Consumer surplus grows
B) Total surplus shrinks
C) Producer surplus grows
D) Total surplus stays the same
International Trade
Assume that France lifts trade barriers that prevented wine

makers from exporting wine. What would you expect to happen?
B) Total surplus shrinks
C) Producer surplus grows
Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
International Trade
What will happen to a good if a country transitions from a policy of

protectionism to a policy of free trade and begins importing goods
from abroad?
A) Prices will decrease and the quantity consumed will decrease
B) Prices will decrease and the quantity consumed will increase
C) Prices will increase and the quantity consumed will increase
D) Prices will increase and the quantity consumed will decrease
International Trade
What will happen to a good if a country transitions from a policy of

protectionism to a policy of free trade and begins importing goods
from abroad?
A) Prices will decrease and the quantity consumed will decrease
B) Prices will decrease and the quantity consumed will increase
C) Prices will increase and the quantity consumed will increase
D) Prices will increase and the quantity consumed will decrease
International Trade
Assume Brazil eliminates trade barriers that prevented the

importation of cars. What would you expect to happen in Brazil?
B) Producer surplus grows
C) Total surplus shrinks
International Trade
Assume Brazil eliminates trade barriers that prevented the

importation of cars. What would you expect to happen in Brazil?
B) Producer surplus grows
C) Total surplus shrinks
International Trade
Which groups benefit from free trade policies?

A) Producers of the exported good in importing countries and consumers
in exporting countries
B) All groups in importing countries
C) Producers of the exported good in exporting countries and consumers
in importing countries
D) All groups in exporting countries
International Trade
Which groups benefit from free trade policies?

A) Producers of the exported good in importing countries and consumers
in exporting countries
B) All groups in importing countries
C) Producers of the exported good in exporting countries and consumers
in importing countries
D) All groups in exporting countries
International Trade
Attribution
Wikipedia. "Export." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Export
Wikipedia. "International trade." CC BY-SA 3.0 http://en.wikipedia.org/wiki/International_trade
Wiktionary. "export." CC BY-SA 3.0 http://en.wiktionary.org/wiki/export
Wiktionary. "trade." CC BY-SA 3.0 http://en.wiktionary.org/wiki/trade
Wikipedia. "International trade." CC BY-SA 3.0 http://en.wikipedia.org/wiki/International_trade
Wikipedia. "Protectionism." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Protectionism
Wikipedia. "Imports." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Imports
Wiktionary. "import." CC BY-SA 3.0 http://en.wiktionary.org/wiki/import
Wiktionary. "trade." CC BY-SA 3.0 http://en.wiktionary.org/wiki/trade
Wiktionary. "protectionism." CC BY-SA 3.0 http://en.wiktionary.org/wiki/protectionism
Wikipedia. "Free trade." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Free_trade
Wikipedia. "Free trade." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Free_trade
Wiktionary. "welfare." CC BY-SA 3.0 http://en.wiktionary.org/wiki/welfare
Wiktionary. "tariff." CC BY-SA 3.0 http://en.wiktionary.org/wiki/tariff
Wiktionary. "free trade." CC BY-SA 3.0 http://en.wiktionary.org/wiki/free+trade
Wikipedia. "Export." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Export
Wikipedia. "Import." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Import

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International Trade > Gains from Trade

Gains from Trade

International Trade > Gains from Trade

Exports: The Economic Impacts of Selling Goods to Other

International Trade > Gains from Trade

Imports: The Economics Impacts of Buying Goods from Other

International Trade > Gains from Trade

Assume that France lifts trade barriers that prevented wine

B) Total surplus shrinks

C) Producer surplus grows

D) Total surplus stays the same

Assume that France lifts trade barriers that prevented wine

B) Total surplus shrinks

C) Producer surplus grows

D) Total surplus stays the same

What will happen to a good if a country transitions from a policy of

B) Prices will decrease and the quantity consumed will increase

C) Prices will increase and the quantity consumed will increase

D) Prices will increase and the quantity consumed will decrease

What will happen to a good if a country transitions from a policy of

B) Prices will decrease and the quantity consumed will increase

C) Prices will increase and the quantity consumed will increase

D) Prices will increase and the quantity consumed will decrease

Assume Brazil eliminates trade barriers that prevented the

B) Producer surplus grows

C) Total surplus shrinks

D) Total surplus stays the same

Assume Brazil eliminates trade barriers that prevented the

B) Producer surplus grows

C) Total surplus shrinks

D) Total surplus stays the same

Which groups benefit from free trade policies?

Which groups benefit from free trade policies?

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