Question

A. What is a benefit of international trade to households?

O Increased profits for households due to the diversity of resources
O Increased wages due to foreign competition of labor
O Increased wealth due to lower prices and greater product diversity
O Increased resource availability due to more production options
b. What is a benefit of international trade to firms?
O Greater profits due to the increased diversity of products available to households
O Lower costs due to lower taxes and less government regulation
O Ability to use productive resources found only in other countries
O Increased cost of both labor and capital goods

Answer 1

a. Increased wealth due to lower prices and greater product diversity b. Ability to use productive resources found only in other countries.

Step-by-step explanation:

A: Benefits of International trade for households, is an increase in wealth as a consequence of the drop in prices of goods that are imported (because these products are produced efficiently abroad), and a potential drop in prices of local goods because productive factors could potentially be more efficiently allocated increasing the productivitiy of such factors. Households also benefit because a higher diversity of products could expand their utility curve by richer consumption alternatives. B: Benefits of international trade for firms is an expansion of the disposable resources available to produce local goods, which could increase the productivity per productive factor by relatively lower prices of resources and higher quantities.