The country of Sabora currently bans all international trade. Sabora makes high-quality spears and is currently producing as many spears as the local population wishes to buy at $50 each. Other countries currently produce and sell spears at $125 each. The newly elected president of Sabora decides to allow international trade for the first time in Sabora's existence. They will begin trade next year. Saboran spear-makers will happily engage in trade. Assume there is free trade, and that Sabora will sell all the spears they make. Note that not all statements will be used. What will happen to the quantity and price of Sabora's spears next year?

Question

Megan Powell

Business

31 March, 10:19

The country of Sabora currently bans all international trade. Sabora makes high-quality spears and is currently producing as many spears as the local population wishes to buy at $50 each. Other countries currently produce and sell spears at $125 each. The newly elected president of Sabora decides to allow international trade for the first time in Sabora's existence. They will begin trade next year. Saboran spear-makers will happily engage in trade. Assume there is free trade, and that Sabora will sell all the spears they make. Note that not all statements will be used. What will happen to the quantity and price of Sabora's spears next year?

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Answers (1)

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Anna · Answer 1

The quantities demanded will increase due to the high quality,

The price to increase to match international prices making Sabora supply of spears to increase.

Explanation:

The country has a competitive advantage since it makes high quality spears, allowing international trade will enable her sale more spears internationally.

The spears prices will adjust upwards because of new markets, the supply will also increase because of increase in prices.