What is true of an autarkic state in the example depicted in the figure,where Pw is the world price of a good?

Question

Quizplus · Accepted Answer

An autarkic state is closed to international trade, meaning it does not participate in the global market and produces and consumes all goods domestically. In the figure, the autarkic price is shown as Pa, which is higher than the world price Pw. If the state were to liberalize and participate in international trade, it would be a price taker, meaning it would have to accept the world price and adjust its production and consumption accordingly. Therefore, choice C is correct. The other options are incorrect because protectionism would maintain the higher autarkic price, meaning consumers would pay more for the good and there are potential gains from liberalization, particularly through increased efficiency and access to a wider range of goods.

What Is True of an Autarkic State in the Example