Question

The biggest profits from foreign trade are received by small countries, whereas domestic prices before conducting international trade are far different from the prevailing world prices. Why is that?

Answer 1

Yes it is true that biggest profit is earned by the small from foreign trade but when they conducting the international trade then the prices are different from the domestic prices of the same good from the prevailing world prices.
This small countries earning big profit because they are dealing with special category of the goods and they are organising all such business activities which are related to high cash flow but the large countries can handle the quantity concept of selling the goods on the Global market this is only reason the overall profit of the large countries high but the margin of the profit is high for the small countries this is only reason why small countries are selling specific categories of the goods in the Global market.
Small countries for also doing various assembling and second level manufacturing services to the big brands of the big country this is only reason they are earning high profit from the various trade services which they deliver to the big countries.
Pricing policies of small countries varies from domestic territory to global market it is because of a simple reason that the price of the Global market is always high in comparison to the domestic territory for sometime it may be less in comparison to the domestic territory it all depends on the competitors available in the Global market that’s why countries always prefer to analyse the work and the goods and services on the basis of the price of the Global market and the world prices.