The domestic supply and demand of a product in Canada is given in the following figure.

-Refer to the figure above.If the world price of this product is $1 and Canada engages in free trade,Canada will ________.

Question

The domestic supply and demand of a product in Canada is given in the following figure.
 
-Refer to the figure above.If the world price of this product is $1 and Canada engages in free trade,Canada will ________.

Quizplus · Accepted Answer

At a world price of $1, the domestic price in Canada is higher than the world price. As a result, Canadian consumers will demand less than the amount produced domestically, and Canadian producers will supply more than the amount demanded domestically. Canada will need to import the difference between its domestic demand and its domestic supply, which is the entire amount consumed in Canada. Therefore, the best choice is D, import the entire amount of this product that is consumed in Canada.

The Domestic Supply and Demand of a Product in Canada