Economic theory suggests that a switch to free trade would:Question 23Select one:a.Result in both countries’ indifference curves shifting outward, increasing the utility of both countries populations.b.Result in no change in the slopes of both countries’ isorevenue lines and budget lines.c.Result in both countries’ indifference curves shifting inward, reducing the utility of the populations both countries.d.Result in one country invading the other country making the quality of life worse in both countries.e.Have no effect on countries’ indifference curves, budget lines, isorevenue lines, or production possibilities curves.

We know that both countries are made better off by free trade because they each attain an indifference curve that provides  Blank 1. Fill in the blank, read surrounding text. utility.

1. The efficiency case made for free trade is that as trade distortions such as tariffs aredismantled and removedA) government tariff revenue will decrease, and therefore national economic welfare willdecrease.B) government tariff revenue will decrease, and therefore national economic welfare willincrease.C) deadweight losses for producers and consumers will decrease, hence increasing nationaleconomic welfare.D) deadweight losses for producers and consumers will decrease, hence decreasing nationaleconomic welfare.E) government tariff revenue will increase, hence increasing national economic welfare.

According to the Ricardian model, all countries will gain equally from free trade:Group of answer choicesTrueFalse

When two countries with different opportunity costs engage in trade based on comparative advantage, the result is:  A. Both countries experiencing increased production and consumption  B. Both countries producing only goods they have an absolute advantage in  C. Both countries experiencing decreased production  D. Both countries producing the same goods

8. In a two product two country world, international trade can lead to increases inA) total production of both products but not consumer welfare in both countries.B) prices of both goods in both countries.C) consumer welfare only if output of both products is increased.D) output of both products and consumer welfare in both countries.E) consumer welfare in both countries but not total production of both products.