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

Canada exports lumber, indicating it has a comparative advantage and lower production costs, leading to a lower equilibrium price domestically. It imports wine, suggesting higher domestic production costs, resulting in a higher equilibrium price without trade.

Canada Produces Both Lumber and Wine