Winners and losers from free trade Consider the market for meekers in the imaginary economy of Meeker town. In the absence of international trade, the domestic price of a meeker is $25. Suppose that the world price for a meeker is $30. Assume that Meeker town is too small to influence the world price for meekers once they enter the international market. If Meeker town allows free trade, then it will meekers. Given current economic conditions in Meeker town, complete the following table by indicating whether each of the statements is true or false. Statement True False Meekertownian consumers are better off under free trade than they were before. Meekertownian producers are worse off under free trade than they were before. True or False: When a country is too small to affect the world price, allowing for free trade will never increase total surplus in that country, regardless of whether it imports or exports as a result of international trade. True False

If Meeker town allows free trade, then it will EXPORT meekers. Since the domestic price of meekers is lower than the world price.

Meekertownian consumers are better off under free trade than they were before. TRUE, since the world price of meekers is higher than the domestic price, the domestic price will increase to match the world price.

Meekertownian producers are worse off under free trade than they were before. FALSE, since the world price of meekers is higher than the domestic price, the domestic price will increase to match the world price.

When a country is too small to affect the world price, allowing for free trade will never increase total surplus in that country, regardless of whether it imports or exports as a result of international trade. FALSE, even if a country is too small to affect the world price, the fact that it engages in world trade will increase total surplus in that country.

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