Use the following scenario to answer the following questions:
Suppose that Canada,an industrialized nation,and Mexico,a developing nation,both produce clothes and cars.The real wage in Mexico is lower than in Canada.The countries have a free trade agreement.Each nation will find a comparative advantage.
-Which country's consumers will benefit from the free trade agreement?

Question

Quizplus · Accepted Answer

Both countries will benefit from the free trade agreement. Canada will have a comparative advantage in producing cars due to their higher real wage, while Mexico will have a comparative advantage in producing clothes due to their lower real wage. This will lead to specialization and increased efficiency, ultimately resulting in lower prices for consumers in both countries.

Use the Following Scenario to Answer the Following Questions