With free trade, the domestic price of a good must be equal to the world price of a good.

Question

Quizplus · Accepted Answer

Free trade, by definition, implies that there are no barriers or restrictions to the flow of goods and services across borders. In such an environment, the domestic price of a good must be determined by the global market forces of supply and demand. This means that the domestic price will equal the world price, assuming that there are no additional costs such as tariffs, transportation, or logistical expenses. Therefore, the statement is true.

With Free Trade, the Domestic Price of a Good Must