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5. Free-trade benefits There are a number of good outcomes associated with international trade for an economy in addition to the positive welfare effects from

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5. Free-trade benefits There are a number of good outcomes associated with international trade for an economy in addition to the positive welfare effects from free trade. Consider the following situation: Without free trade, Cardinalia has market power as a local producer. Once free trade is implemented in the local economy, Cardinalia is no longer able to raise its prices above competitive levels. The scenario described above represents which of the following benefits of free trade? Increased variety of goods Lower costs through economies of scale Increased competition An enhanced flow of ideas

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