If a country maintains its level of exports to another country under free trade,even after its world price is equalized and there are no international shortages or surpluses,it must have a
A) comparative advantage in that good.
B) comparative disadvantage in that good.
C) lower domestic price for the good than would be the case if trade were not permitted.
D) higher rate of domestic consumption of the good than would be the case if trade were not permitted.
E) persistent domestic shortage of the good that necessitates a tariff on it.

Question

Quizplus · Accepted Answer

If a country maintains its level of exports to another country under free trade, even after its world price is equalized, it must have a comparative advantage in that good. This means that it can produce the good more efficiently and at a lower cost than its trading partner, allowing it to continue exporting the good even when world prices have equalized.

If a Country Maintains Its Level of Exports to Another