In the opening of free trade,if world prices of a good are less than domestic prices of that same good,
A)domestic consumers will experience a loss of surplus.
B)domestic prices will drop to the world price level.
C)all domestic producers of that good will try to find another market because they can't compete with foreign producers.
D)domestic producers will increase the quantity supplied in order to crowd out the foreign-produced good.

Question

Quizplus · Accepted Answer

In the opening of free trade, if world prices of a good are less than domestic prices of that same good, then the domestic prices will drop to the world price level. This is because in order to remain competitive and sell their goods, domestic producers will have to lower their prices to match the lower world price. As a result, domestic consumers will benefit from the lower prices, but domestic producers may experience a loss in profit or may have to adapt to the new market conditions.

In the Opening of Free Trade,if World Prices of a Good