For any country that allows free trade,
A)domestic quantity demanded is equal to domestic quantity supplied at the world price.
B)domestic quantity demanded is greater than domestic quantity supplied at the world price.
C)both producers and consumers in that country gain when domestic products are exported,but both groups lose when foreign products are imported.
D)the domestic price is equal to the world price.

Question

Quizplus · Accepted Answer

In a free trade regime, the domestic market is open to foreign competition, and hence, the domestic market price is determined by the world price. This means that the domestic price will be equal to the world price as seen in option D. Options A and B are incorrect because they suggest an imbalance in the domestic market, which is unlikely in a free-trade environment. Option C is incorrect because the gains and losses of producers and consumers depend on a variety of factors such as competitiveness, comparative advantage, and market conditions, and cannot be generalized.

For Any Country That Allows Free Trade