Suppose a country abandons a no-trade policy in favor of a free-trade policy.If,as a result,the domestic price of pistachios decreases to equal the world price of pistachios,then

Question

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If the domestic price of pistachios decreases to equal the world price, it implies that the domestic producers can no longer sell their pistachios at a higher price, making it unprofitable to produce. Therefore, they will reduce production or stop producing altogether. This situation will create a shortage of pistachios in the domestic market, and the country will become an importer of pistachios to satisfy its demand. Option B is incorrect because, in a free trade scenario, a country may have a comparative advantage in producing a particular product, but it does not guarantee that it will produce that good. Option C is incorrect because the quantity of pistachios supplied in the domestic market will decrease, leading to a shortage, and hence, the quantity demanded will exceed the quantity supplied.

Suppose a Country Abandons a No-Trade Policy in Favor of a Free-Trade