The following diagrams show the Canadian markets for newsprint and machinery, which we assume to be competitive.

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The following diagrams show the Canadian markets for newsprint and machinery, which we assume to be competitive.
a. Suppose there is no international trade. What would be the equilibrium price and quantity in the Canadian newsprint and machinery markets?
b. Now suppose Canada is open to trade with the rest of the world and the world price of newsprint is higher than the price of newsprint from part (a). Show in the diagram the quantities of domestic consumption and production and the quantity of newsprint that is either exported or imported.
c. Similarly, suppose the world price of machinery is lower than the price of machinery from part (a). Show in the diagram the quantity of domestic consumption and production and the quantity of machinery that is either exported or imported.

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Microeconomics

ISBN: 978-0321866349

14th canadian Edition

Authors: Christopher T.S. Ragan, Richard G Lipsey

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