Consider a market that is initially in equilibrium with quantity demanded equal to quantity supplied at a price of $20. If the world price of the good is $10 and the country opens up to international trade then in this market then
A) imports will increase, price will fall, and quantity supplied will fall
B) exports will increase, price will be unchanged, and quantity supplied will increase
C) imports will increase, price will decrease, and the supply curve will shift to the left
D) quantity demanded will decrease, quantity supplied will decrease, and price will decrease

Question

Quizplus · Accepted Answer

When the world price is lower than the domestic price, the country will import the good, leading to a decrease in domestic price and a decrease in quantity supplied.

Consider a Market That Is Initially in Equilibrium with Quantity