Describe the potential benefits and the potential costs to global trade of the tremendous growth in regional trade agreements
What will be an ideal response?
A regional trade agreement creates preferential treatment for nations that are participants, which violates the idea of MFN status in multilateral agreements, where nations agree to treat all participants the same. The WTO recognizes that regional agreements destroy some opportunities for trade by making non-members face higher barriers than members of the regional agreement. But it believes that they create more trade than they divert, and the regional agreements allow nations to try out arrangements that may later be adopted more broadly.
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It is essential to establish specific criteria to judge the performance of any economic system. Two such criteria are
A) efficiency and equity. B) profit opportunities and technological progress. C) efficiency and profit opportunities. D) technological progress and achieving general equilibrium.
When the price of a good changes, the substitution effect can be found by comparing the equilibrium quantities purchased
A) on the old budget line and the new budget line. B) on the original indifference curve when faced with the original prices and when faced with the new prices. C) on the new budget line and a hypothetical budget line that is a shift back to the original indifference curve parallel to the new budget line. D) on the new indifference curve.