Final answer:
When the world price for a good is higher than its domestic price, a country will likely export more of the good and increase its domestic production to meet international demands.
Step-by-step explanation:
If the world price for a good is higher than the domestic price, it is likely that the country will export more of the good. This is because the goods produced domestically can be sold at a higher price in international markets, making exports more profitable for domestic producers.
Consequently, the country will likely increase production of the good to meet the higher demand from the foreign markets.
On the contrary, if the domestic price were higher than the world price, the country would experience an increase in imports, because foreign goods would be cheaper than those produced domestically, leading to a decrease in domestic production and an increase in imports.
This concept is closely related to the ideas of the foreign price effect, where relative prices influence the level of exports and imports between countries.