Exhibit 29-2
-Suppose two countries trade two goods without government restrictions. If transportation costs are negligible and markets are competitive, then the price of the goods

Question

Exhibit 29-2 
-Suppose two countries trade two goods without government restrictions. If transportation costs are negligible and markets are competitive, then the price of the goods

Quizplus · Accepted Answer

In the absence of transportation costs and government restrictions, the market forces of supply and demand will equalize the prices in both countries. This is because competition will drive the price down in the high-wage country and drive it up in the low-wage country until the prices are equal. Thus, the price of the goods must be the same in both countries.

Exhibit 29-2 -Suppose Two Countries Trade Two Goods Without Government Restrictions. If