The country of Sabora currently bans all international trade. Sabora makes high-

Question

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? Answer Bank There will be movement along Sabora's supply curve. Sabora's supply curve will shift to the left. A greater quantity of Sabora's spears are supplied at a higher price.A A greater quantity of Sabora's spears are supplied at the same price. Sabora's supply curve will shift to the right Sabora's spear prices are lower for the same quantity When international trade is allowed, there will be a larger population and market that desires Sabora's spears. As a result, Sabora's spear income will decreasc. will decrease will remain unchanged. will increase.

Explanation / Answer

In the given case there would be following changes in price and quantity of Sabora Spears.

1. There will be movement along the Sabora's supply curve.

2. The greater quantity of Sabora Spears supplied at higher prices.

When international trade is allowed there will be larger population and market that desires Sabora's Spears. As a result, Sabora's Spears income will increase.

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