Question

When trade occurs between two countries world price of that good falls between which two costs?

Answer 1

In a world without trade, the equilibrium price and quantity in each country would be determined by the domestic supply and demand for the good.

Step-by-step explanation:

In a world without trade, the equilibrium price and quantity in each country would be determined by the domestic supply and demand for the good. The equilibrium price is the point where the quantity supplied equals the quantity demanded. This can be determined by examining the supply and demand curves for the good in each country.

For example, if the domestic supply of the good exceeds the domestic demand, the price would be lower. On the other hand, if the domestic demand exceeds the domestic supply, the price would be higher. The quantity exchanged in trade would depend on the difference between the domestic price and the world price.

Therefore, in a world without trade, the equilibrium price and quantity in each country would be solely determined by the domestic factors of supply and demand.