Consider a trade agreement such as the North American Free Trade Agreement which was signed between the United States, Canada and Mexico. The agreement lowered tariffs between the countries (i.e. moved towards free trade).

18. Why would the countries agree to lower tariffs?

a) Because the United States gains more than Mexico loses b) Because Mexico gains more than the United States loses c) Because lower tariffs increase the economic welfare of each country d) Because the long-run gains offset the short-run losses

d) Because the long-run gains offset the short-run losses

19. Consider the market for chemicals (a good in which the United States has a comparative advantage) in the United States. Which of the following best describes who in the U.S. benefits from implementation of the North American Free Trade Agreement? a) Consumers and Producers b) Producers and the Society as a whole c) Consumers, Producers, and Society as a whole d) Consumers and Society as a whole

20. Consider the market for tomatoes (a good in which the United States has a comparative disadvantage) in the United States. Which of the following best describes who in the U.S. benefits from implementation of the North American Free Trade Agreement?

a) Consumers and Producers b) Producers and Society as a whole c) Consumers and Society as a whole d) Consumers, Producers, and Society as a whole