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Next, suppose that through technical advance, bottled water could be imported at a world price of $1.00 per liter, much cheaper than the domestic equilibrium
Next, suppose that through technical advance, bottled water could be imported at a world price of $1.00 per liter, much cheaper than the domestic equilibrium price. This is cheaper than the cost of even the most efficient domestic supplier of bottled water. Domestic "utility supplied" water is essentially zero. If trade is unrestricted, what is the new market equilibrium? How much bottled water will be imported with no import restrictions? What are the welfare gains resulting from introduced access to these cheap imports, and how are they distributed among producers and consumers
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