Final answer:
The free market price for imported semiconductors from the United States to Brazil is $23.00 per semiconductor. An example that illustrates price determination through trade is the sugar market between Brazil and the United States, which reaches equilibrium when the price in both countries converges to 16 cents per pound.
Step-by-step explanation:
If we consider the scenario where Brazil imports semiconductors at the free market price, according to the information provided, the price per semiconductor is $23.00. However, examining the dynamics of the sugar trade between Brazil and the United States provides further insight into trade and price determination. Before trade, sugar in Brazil was priced at 12 cents per pound and 24 cents per pound in the United States. When trade is introduced, the price of sugar converges to 16 cents per pound due to profit-seeking firms buying sugar in Brazil to sell in the United States. This situation illustrates how international trade affects supply and demand, thereby influencing prices.
The dynamics of the sugar trade are a classic example of the economic principle that trade will continue until prices equalize between two trading countries. This principle is demonstrated in Figure 21.2, where the equilibrium with trade occurs at 16 cents per pound. At this price, Brazilian sugar farmers supply a quantity of 40 tons, with Brazilian consumers purchasing only 25 tons, leading to an export of 15 tons from Brazil to the United States.