Draw and refer to graphs of supply and demand curves

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Consider a two-country world. Each country has an upward-sloping national supply curve for raisins and a downward-sloping national demand curve for raisins. With no trade in raisins, the no-trade equilibrium price for raisins in one country would be $2.00 per kilogram and the no-trade equilibrium price for raisins in the other country would be $3.20 per kilogram.

If the countries allow free trade in raisins, explain why $3.50 per kilogram cannot be the free-trade equilibrium world price for raisins.

In your answer, draw and refer to graphs of supply and demand curves for the two national markets.

Reference no: EM131210858

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