If the world price for gadgets were $4 and there were no trade restrictions, what would Econia do with its surplus of gadgets?

When the world price for gadgets is set at $4 and there are no trade restrictions, Econia would likely choose to export its surplus of gadgets. In a free market, if the domestic price is above the world price, the country has an incentive to sell its surplus goods to foreign markets where they can fetch a higher price, thus maximizing producers’ profits.

By exporting, Econia can offload the excess supply of gadgets that is not being consumed domestically at the prevailing price. This export activity can lead to increased revenue for producers, as they can take advantage of the higher prices offered by international buyers.

In contrast, the other options would not be consistent with the economic logic of responding to surplus in a market setting. For instance, importing would be counterproductive since Econia already has a surplus and would only exacerbate the issue. Reducing production could also be seen as a missed opportunity; instead of cutting back on gadgets, it would be more beneficial to export them. Increasing tariffs on gadgets would typically protect domestic producers from foreign competition but wouldn't solve the issue of the surplus and would likely lead to trade retaliation or higher prices for consumers.

Hence, the most rational response for Econia in this scenario is to export the surplus gadgets to