When a country allows free trade,how will the domestic price of a product compare with the world price

Question

Quizplus · Accepted Answer

When a country allows free trade, the domestic price of a product will equal the world price. This is due to the fact that there are no trade barriers in place, and therefore, the market is able to adjust to the global supply and demand for the product. If the domestic price was higher than the world price, consumers would simply purchase the product from abroad at a lower cost, and vice versa if the domestic price was lower.

When a Country Allows Free Trade,how Will the Domestic Price