(Figure: Corn and Watches in the United States and Canada) Referring to the graphs, we see that _____ will benefit from free trade, but _____ will not.

Question

Quizplus · Accepted Answer

From the graph, it is evident that both the United States and Canada will benefit from free trade. In the case of corn, the United States has a comparative advantage, while in the case of watches, Canada has a comparative advantage. Therefore, with free trade, both countries can specialize in producing the good they have a comparative advantage in and trade with each other, leading to a net increase in welfare for both countries.