Suppose that the world price of eggs is $1 a dozen, Canada does not trade internationally, and the equilibrium price of eggs in Canada is $3 a dozen.Then Canada begins to trade internationally.Canadian farmers produce _______eggs.Canada _______ eggs.

Question

Quizplus · Accepted Answer

Since the world price of eggs is $1 a dozen, Canadian farmers would not be able to sell their eggs for $3 a dozen domestically. To remain competitive, they will have to lower their prices to $1 a dozen. As a result, Canadian farmers will produce less eggs and Canada will import eggs from other countries where they can be produced at a lower cost.

Suppose That the World Price of Eggs Is $1 a Dozen