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Competition Among Traders: Trade Restrictions and Recession

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1. Will a country do better importing or exporting a good for which it has a comparative advantage? Why?

2. Why does competition among traders affect how much of the gains to trade are given to the countries involved in the trade?

3. If you were economic adviser to a country that was following your advice about trade restrictions and that country fell into a recession, would you change your advice? Why, or why not?

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Solution Summary

Trade Restrictions and Recession are examined.

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1. Will a country do better importing or exporting a good for which it has a comparative advantage? Why?
It would be better for that country to export goods. Because if a country has a comparative advantage for a certain type of good such as producing cheaply or more efficiently, this country would have greater output and it would be more beneficial for this country to export these goods to the other countries which have less absolute advantage. It would also be more ...

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Umut Oltulu, MBA
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  • BSc, Dokuz Eylul University
  • MBA, Texas A&M University-Kingsville
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