If the world price is higher than the no-trade domestic price, then domestic producers gain and domestic consumers lose as a result of free trade.

Question

Quizplus · Accepted Answer

When the world price is higher than the no-trade domestic price, domestic producers are able to sell their goods at a higher price in the global market, resulting in increased profits. However, domestic consumers will have to pay a higher price for foreign goods and may switch to domestic alternatives if available. As a result, they may have to pay a higher price for domestic goods as well, leading to a net loss for them.

If the World Price Is Higher Than the No-Trade Domestic