Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 9 - Part III - Application: International Trade - Quick Check Multiple Choice - Page 189: 2

Answer

c) Domestic production of coffee falls, and Ectenia becomes a coffee importer.

Work Step by Step

If the domestic price falls after opening up to trade, this indicates that prior to trade, Ectenia had a higher domestic price relative to the world price. This means that the Ectenia has a high opportunity cost of production, which demonstrates that it does not have a comparative advantage in the production of coffee. Therefore, Ectenia will be an importer.
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