Question

If a country allows trade and, for a certain good, the domestic price without trade is lower than the world price, the country will be an exporter of the good. the country will be an importer of the good the country will be neither an exporter nor an importer of the good Additional information is needed about demand to determine whether the country will be an exporter of the good, an importer of the good, or neither.

Answer 1

D.

As given the nation's domestic price is lower then the world price, thus the country has absolute advantage in the production of that good. However we know that comparative advantage decides what the nation will export and import not the absolute advantage. Hence, additional information about the other goods and its comparative advantage are required to decide whether the country will be an importer or exporter of that good.