International trade: Effects of international trade on domestic market

International trade can have big effects on domestic markets. That is, for both  import goods and export goods of a state.

Effects of international trade on demand and supply of goods

Opening up to international trade affects the supply or demand for the particular goods in the market. The trade tends to reduce the prices of consumption goods, creating welfare gains for consumers in importing countries.

Competition of market goods in international trade

The competitiveness of the market goods affects equilibrium price and quantity. By increasing competition, international trade can force producers to become more efficient. That is, they are not developing country firms that would get wiped out by vastly superior foreign firms. Additionally, It might also produce innovation by exposing producers to new ideas. International trade is particularly important for developing countries. However, to increase their productive capabilities and thus develop their economies, they need acquire better technologies

Effects of international trade on Domestic monopoly

Describe how opening up to trade specifically affects a domestic monopoly. Include an explanation, using game theory, of how even a single additional competitor can lead to a market outcome similar to perfect competition. In nowadays global settings, the markets are populated and often manipulated by large companies, which have market power. To counter and mitigate the possibilities of anti-competitive behaviors, most countries now have a competition laws for breaking up monopolies and banning collusion among oligopolistic firms. Nevertheless, history has shown that no monopoly is safe in the long run. Companies that once had near monopoly of their respective markets and had been considered invincible have lost such positions and even disappeared into the dustbin of history.

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