If a country allows trade and the domestic price of a good is higher than the world price:

Question

Quizplus · Accepted Answer

If the domestic price is higher than the world price, it means that domestic producers are charging more than foreign producers for the same good. This will create an incentive for domestic consumers to switch to foreign producers, leading to an increase in imports. Hence, the country will become an importer of the good.

If a Country Allows Trade and the Domestic Price of a Good