Suppose the domestic price of copper is $1.20 per kilogram in Canada, while the world price is $1.00 per kilogram.Assuming no transportation costs, Canada will:

Question

Quizplus · Accepted Answer

Since the world price of copper is cheaper than Canada's domestic price, Canadian consumers will prefer to buy copper from the world market. As a result, Canadian producers will not be able to sell all their copper domestically and will have to reduce their prices in order to compete with the cheaper world price. This will lead to an increase in the demand for Canadian copper in the foreign market, resulting in Canadian producers exporting copper to other countries. This means that Canada will have to import copper to meet its domestic demand. Therefore, the correct answer is option C: import copper.

Suppose the Domestic Price of Copper Is $1