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AAEC 2305 Fundamentals of Ag Economics - page 13 / 27

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(continued)

For commodities where the small country holds, the world market can buy (sell) as much as the economy can produce (purchase) at a given world price.

Hence, if the government does not intervene in international trade, the equilibrium domestic price is equal to the world price.

Since the value of American trade, including agricultural trade, is by far the largest of any nation, it may appear that the U.S. can dominate the world market.

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