When transportation costs are included in a trade model
A) an exporting country's gains from trade decrease.
B) an exporting country's gains from trade increase.
C) an exporting country's volume of trade increases.
D) an exporting country's terms of trade can improve.

Question

Quizplus · Accepted Answer

Including transportation costs in a trade model typically reduces an exporting country's gains from trade because these costs represent an additional expense that must be subtracted from the benefits of trade.

When Transportation Costs Are Included in a Trade Model