When two or more nations engage in free trade, how is the standard of livingimproved in the participating countries?goods become more expensive, demand rises, and output increasesgoods become cheaper, demand lowers, and output decreasesgoods become more expensive, demand lowers, output decreasesgoods become cheaper, demand rises, and output increases

Free-trade is a situation where the participants of trade do not impose any restriction upon the import or export of goods-and-Services to and from its partner country(trade partner). Free trade often occurs through bilateral agreements or multilateral agreements implemented by trade blocs or other regional and international economic communities.Free trade encourages trade participants to specialize in Production(P) of few goods(g). This allows for the participant to consume on a point above its Production-Possibility-Frontier(PPF) (through gains from trade). In free trade there is mobility of factors and unrestricted movement of products from one market to another. This mobility alone reduces the price(p)s of goods(g) and the Law-of-Demand dictates that, when price(p)s fall, demand rises. Thus , the 1st option is incorrect. It is true that price(p)s of goods-and-Services in free trade reduces making it cheaper for consumption. However, the Law-of-Demand dictates the demand to go up if price(p)s fall, thus when the prices(p) fall, goods become cheaper and the domestic-demand rises. Which is exactly what happens in a Free-Trade-Area(FTA). Thus the 2nd option is incorrect. Free trade allows its participants to specialize in the Production(P) of goods-and-Services it is efficient in and has a lower opportunity cost. This specialisation helps in creation of economies-of-scale and further improving efficiency of Production(P). All these factors aid in the decrease of costs and when engaged in trade, also the price(p). Thus , the 3rd option is incorrect. As mentioned above several times, specialisation, economies-of-scale, unrestricted movement of goods(g) from one market to another (factor mobility) allow for decrease in price(p) of the goods-and-services a consumer has access to. Due to the decrease in price(p) the demand increases. And as demand increases , the producers increase their supply to match the demand, hence the output also increases. Thus, the 4th option is correct. The correct answer is the FOURTH OPTION.