Respuesta :
Answer:
The small country assumption is made in developing models of international trade because it applies to US markets.
b) False
Explanation:
The small country assumption, which states that a country's imports are small compared to the world market's imports, such that when this country's imports are eliminated, no noticeable effect will be felt on the world demand for the product or the product's price, cannot be applied to the US markets. For example, the US markets are so large in proportion to the world's market demand for a product like crude oil that when the US does not import its share of the quantities of crude oil, the price of crude falls, and the quantity supplied overruns quantity demanded, causing market disequilibrium. This assumption cannot, therefore, be applied to the US markets.
The US market covers a large proportion of the world's imports and export. The statement for the consideration of the US as a small country in international trade is false.
What is a small country assumption?
The small country assumption is defined as the consideration of the little contribution of the country to the international import. The lack of prohibition of imports to that country did do not rise much effect on international trade.
The US has been the largest group involved in international trade. It is the major importer of many products from the world. Thus, it can not be considered a small country assumption.
Hence, the given statement is false.
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