If we allow free trade in a small nation's industry where there is a domestic monopolist, the monopoly firm:

Question

Quizplus · Accepted Answer

When free trade is allowed, the domestic monopolist loses its ability to act as a price setter and must compete with foreign firms, therefore becoming a price taker and behaving like a competitive firm. This means that the monopolist is not able to charge a higher price, and instead must charge a price that is equivalent to other firms in the industry. Therefore, the correct answer is C.

If We Allow Free Trade in a Small Nation's Industry