Final answer:
In the absence of government intervention, the equilibrium price and quantity in each country would be determined by supply and demand. If trade is allowed to occur, the equilibrium price and quantity would be determined by global market forces. The new equilibrium price and quantity can be determined by analyzing the shifts in supply and demand due to trade.
Step-by-step explanation:
In the absence of government intervention, the equilibrium price and quantity in each country would be determined by the forces of supply and demand. The equilibrium price is the price where the quantity supplied equals the quantity demanded, and the equilibrium quantity is the quantity at which this occurs.
If trade is allowed to occur, the equilibrium price and quantity in each country would be determined by the global market. Countries with a comparative advantage in producing a certain good would specialize in its production and export it, while countries with a comparative disadvantage would import the good. This specialization and trade would lead to a new equilibrium price and quantity in each country.
The new equilibrium price and quantity can be determined by looking at the shifts in supply and demand due to trade. For instance, if a country has a comparative advantage in producing a good, its export supply will increase, leading to an outward shift in supply. On the other hand, if a country has a comparative disadvantage in producing a good, its import demand will increase, leading to an inward shift in demand. By analyzing these shifts, we can determine the new equilibrium price and quantity in each country.