International Economics
16th Edition
ISBN: 9781305887633
Author: Robert Carbaugh
Publisher: Cengage Learning
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Question
Chapter 3, Problem 1SQ
To determine
Explain the effect of transportation cost on international trade patterns.
Expert Solution & Answer
Explanation of Solution
In general, the transportation costs disturb the location of the industry, as the firms know that transportation costs and production costs affect profitability. A firm reaches its level while it can minimize its total operating costs, including the production of goods and services and transportation costs. Thus, adding of transportation costs to the prices of traded goods leads to decrease the nation's trade level.
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