Question

According to the new trade theory, which of the following is most likely to be a result of market expansion due to trade?

1) Increase in competition
2) Decrease in prices
3) Increase in employment
4) Decrease in consumer surplus

Answer 1

The most likely result of market expansion due to trade is an increase in employment.The correct answer is option 3.

Step-by-step explanation:

The new trade theory suggests that market expansion due to trade can result in various outcomes.

Among the options listed, the most likely result of market expansion due to trade is an increase in employment. This is because market expansion can lead to the growth of industries, which creates more job opportunities.

While an increase in competition can also be a result of market expansion, it is not the most likely outcome. Market expansion can also lead to a decrease in prices, especially if there is an increase in supply due to trade.

However, a decrease in consumer surplus is not a likely result of market expansion due to trade. Consumer surplus refers to the benefit consumers receive when they pay less for a product than they are willing to pay.

Market expansion can actually lead to an increase in consumer surplus as it may provide consumers with more choices and lower prices.The correct answer is option 3.