Canada produces both lumber and wine.Canada exports lumber and imports wine.The rest of the world imports Canadian lumber and exports wine to Canada.If Canada did not trade with the rest of the world, then the equilibrium price of lumber would be _______ in Canada than the rest of the world, and the equilibrium price of wine would be _______ in Canada than the rest of the world.

Question

Quizplus · Accepted Answer

If Canada did not trade with the rest of the world, there would be an excess supply of lumber in Canada and an excess demand for wine in Canada. This would result in a lower equilibrium price for lumber in Canada compared to the rest of the world due to the oversupply, and a higher equilibrium price for wine in Canada compared to the rest of the world due to the increased demand.

Canada Produces Both Lumber and Wine