Case Interview Prep

Category - Economics

Country A has only recently begun exporting Gold. According to the figure below, what has the move from domestic consumption alone to export meant for prices paid by domestic consumers?
  1. not enough information is available
  2. prices remained the same
  3. prices decreased
  4. prices increased
Explanation
Answer: D - Prices increased for domestic consumers.

Key Takeaway: When countries engage in trade, there is an expected change in prices on locally produced goods for domestic consumers. In the above example, domestic consumers paid more for Gold following trade. Domestic consumers are more likely to pay world prices for domestic goods once trade is initiated.
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