14.

1 HW #2

1. J
2. Y
a. Since there is increased competition due to international trade, firms must
produce at greater efficiency, leading to lower prices for consumers. Consumers
also can get imports of a larger variety of goods and services with possibly higher
quality, increasing choice/variety for consumers.
b. As a result of greater competition, firms are forced to be more efficient and try to
produce at lowest possible costs. Increased competition leads to greater
efficiency because otherwise, firms must charge higher prices for goods and less
consumers will purchase the goods. Their overall profits will go down if they are
not efficient.
c. Domestic economy benefits society because it can use its resources to specialize
in production of a certain good/service and produce them more efficiently at
lower costs of production or with fewer resources used. They can trade some of
them for other goods produced more efficiently in other countries. Domestic
economy benefits as there won’t be a waste of scarce resources within specific
countries/societies because each society/country doesn’t have to worry about
 producing something they aren’t necessarily abundant of. Domestic economy
allows for an acquisition of larger overall quantities of goods and services.
d. Strong international trade linkage between countries could form the beginning
of an economic relationship that would reduce the possibility of war or other
hostilities. The strong economic interdependence created by trade and other
links between countries makes the possibility of war inconceivable, an example is
possibly the EEC where the possibility of war between France and Germany is
eliminated.

14.4 HW #1

1. Y
a. Excess quantity supplied therefore exports at world price level=55-25=30 million
excess
b. 30 million x 9 = $270 million