3. In the gains from trade diagram in Figure 3-3, suppose that instead of having a rise...

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3. In the gains from trade diagram in Figure 3-3, suppose that instead of having a rise in the relative price of manufactures, there is instead a fall in that relative price.

a. Starting at the no-trade point A in Figure 3-3, show what would happen to production and consumption.

b. Which good is exported and which is imported?

c. Explain why the overall gains from trade are still positive.

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International Economics

ISBN: 9781429231183

2nd Edition

Authors: Robert C. Feenstra, Alan M. Taylor

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