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When All Trade Is Prohibited in Good X, the Equilibrium

Question 43

Multiple Choice

When all trade is prohibited in good X, the equilibrium price in the home country is PX. After free trade is instituted, the domestic country begins to import good X from the rest of the world. As a result of free trade:


A) the domestic price of good X will fall.
B) the domestic price of good X will rise.
C) the domestic price of good X will exceed the price in foreign countries.
D) the domestic price of good X will be less than the price in foreign countries.
E) the domestic producers will gain surplus at the expense of domestic consumers.

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