Under what condition will a product be traded between two countries based on pre-trade prices ?
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Answer: B. is greater than the cost of transporting it between them equals the cost of transporting it between them
Explanation
International trade of a product only occurs when the pre-trade price difference between two locations exceeds the transaction and transport costs. Traders exploit international price discrepancies only if the profit margin covers all shipping and handling expenses. If transport costs exceed the price gap, profitable arbitrage becomes impossible and trade does not happen. Arbitrage drives international commerce by moving goods from low-price markets to high-price destination markets. Transport costs include freight charges, insurance premiums, loading fees, and customs clearance paperwork. Pre-trade price differentials reflect differing domestic supply and demand conditions across isolated countries.
Stating that the price gap is simply less than transport costs contradicts the fundamental condition for profitable trade. Equalling transport costs creates a zero-profit threshold where trade offers no financial incentive for merchants. Claiming more information is needed ignores the well-established economic rule governing trade and shipping expenses.
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