When transportation costs are included in a trade model
A) a country's gains from trade decreases
B) a country's gains from trade increases
C) a country's volume of trade increases
D) a country's terms of trade improve

Question

Quizplus · Accepted Answer

Including transportation costs in a trade model typically decreases a country's gains from trade because these costs reduce the net benefits from trading by increasing the overall cost of importing and exporting goods.

When Transportation Costs Are Included in a Trade Model