If Markets Are Perfectly Competitive, the Free-Trade Price of a Good

question 23

True/False

If markets are perfectly competitive, the free-trade price of a good in an importing country is expected to be lower than the pre-trade price of the good in that country.

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Definitions:

Missed Opportunities

Potential benefits or gains that are forfeited when a choice is made over alternative options.

Quota Rents

Revenue earned by the holder of import quotas, calculated by the difference between the domestic price and the world price of the imported goods.

Equalibrium Quantity

The quantity of goods or services that is supplied and demanded at the equilibrium price, where the quantity supplied equals the quantity demanded.

Binding Price Ceiling

A government-imposed price limit that is set below the equilibrium price, causing a shortage of the product because demand exceeds supply.