Given free trade, small nations tend to benefit the most from trade since they ?
Correct answer: D. Realize terms of trade lying near the MRTs of their large trading partners
- A. Are more productive than their large trading partners
- B. Are less productive than their large trading partners
- C. Have demand preferences and income levels lower than their large trading partners
- D. Realize terms of trade lying near the MRTs of their large trading partners
Explanation
A small country cannot significantly influence world prices, so its terms of trade are close to the large partner’s internal relative price, represented by that partner’s MRT. This lets the small country obtain relatively large gains from trade.
Last updated
About Microeconomics
Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
Practise Microeconomics
1,705 free Microeconomics MCQs from Economics, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Exams that ask Economics questions like this
Economics is on 2 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
Related questions
_____ 1954 study of U.S trade patterns showed that U.S exports were labor-intensive compared with U.S imports, even though the United States was widely regarded as a relatively capital-abundant nation ?
A attempts to limit outsourcing of jobs to foreigners by requiring that a minimum percentage of a product's value must be produced domestically if that good is to be sold in the domestic market ?
A binding price ceiling creates?
A borrower gives to creditor a security to grantee repayment of a loan. What is this security called ?
A buyer's willingness to pay is that buyer's ?