When will the domestic price of a product equal the world price
A)when the domestic supply of the product increases
B)when trade restrictions are imposed on the product
C)if the government imposes trade restrictions
D)if neither trading country has a comparative advantage in the production of the good

Question

Quizplus · Accepted Answer

When neither trading country has a comparative advantage in the production of a good, the domestic price will equal the world price. This is because neither country is more efficient than the other in producing the good, so there is no incentive to trade at a different price. In other situations, supply and demand factors, as well as trade restrictions, can cause the domestic price to differ from the world price.

When Will the Domestic Price of a Product Equal the World