Question

Two nations sign a trade agreement expecting to enjoy mutual gains from the trade of a certain good. How will this event likely affect the supply of the good in the two nations?

Answer 1

Answer: The supply of the good in the two nations will likely increase

Explanation: The trade agreement between the two nations will increase the number of suppliers. This is not a factor that results in the elongation of the supply curve as it is not price related. Instead, this will lead to the shift of the supply curve to the right, where there will more quantity of the good supplied, at every price.  

If there was formerly a shortage of the good in both nations, this will help to ensure adequate supply in the short run.