Question

If the domestic price in country A is higher than the world price before trade, who is hurt when the country opens up to international trade?


Domestic consumers

Domestic sellers

International sellers

Government

Answer 1

When country A opens up to international trade and its domestic price is higher than the world price, the group that is primarily hurt is **domestic sellers**.

Here's the reasoning:

1. **Domestic Consumers**: They benefit from international trade because they can purchase goods at a lower world price instead of the higher domestic price.

2. **International Sellers**: They benefit as they can enter the market and sell at a competitive price to consumers in country A.

3. **Government**: The impact on the government can vary depending on tariffs and regulations, but generally, it does not suffer directly from the opening of trade.

4. **Domestic Sellers**: These are the ones who are hurt because, by opening to trade, they now face competition from international sellers who will be able to sell their products at a lower price. This can lead to a reduction in sales for domestic sellers, lower prices domestically, and potentially even losses or business closures.

In summary, when country A opens up to international trade in this scenario, **domestic sellers** are the ones who are hurt.