In the context of international trade, what is the equilibrium world price?

• A. The price at which domestic supply equals domestic demand in a single country.
• B. The price at which the quantity supplied by exporters equals the quantity demanded by importers in the global market.
• C. The price set by the largest exporting country regardless of demand.
• D. The average price of a good across all countries.

Answer: (B)

Verified step by step guidance

1. Understand that the equilibrium world price in international trade is determined by the interaction of global supply and demand, not just within a single country.
2. Identify that exporters supply goods to the global market, while importers demand goods from it, so the equilibrium price balances these two quantities.
3. Formulate the condition for equilibrium world price as the price where the total quantity supplied by all exporting countries equals the total quantity demanded by all importing countries.
4. Recognize that this price is not simply set by the largest exporter or an average price, but by the intersection of global supply and demand curves.
5. Summarize that the equilibrium world price is the price at which the quantity supplied by exporters equals the quantity demanded by importers in the global market.