SCENARIO: SUGAR TRADE IN BIRDONIA
In autarky, suppose that equilibrium sugar price is $100 per
Ton in Birdonia, a small agricultural nation.Now, suppose
Birdonia engages in free trade with the rest of the world.
The world price of sugar is $125 per ton.
Reference: Ref 101
(Scenario: Sugar Trade in Birdonia) What will happen to the
Domestic price of sugar in Birdonia?
A) It will rise to $125 per ton.
B) It will fall by $25 per ton.
C) It will remain $100 per ton.
D) It will first rise to $125 per ton, then fall to $100 per ton.
Correct Answer:
Verified
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