With completely free trade, the world supply curve is shown as: A

Economics Dec 09, 2020

With completely free trade, the world supply curve is shown as:

A. a line parallel to and above the domestic supply curve.

B. a horizontal line at the domestic equilibrium price.

C. a line parallel to and below the domestic supply curve.

D. a horizontal line at the prevailing world price.

Expert Solution

D. a horizontal line at the prevailing world price .

The world price is detected at the intersection points of demand and supplies of the world economy. The world supply curve is a horizontal straight line because the supply in the global market exhibits perfectly elastic. Hence, this amount of supply follows an infinite level of quantity.

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