Question

please answer all the questions correctly

Suppose that the world price of oats is 30 cents a kilogram. Canada does not trade internationally, and the equilibrium price of oats in Canada is 40 cents a kilogram. Canada then begins to trade internationally. The price of oats in Canada Canadian consumers buy oats. Canadian firms produce oats. Canada _oats. Select one: a. rises/more/less /exports b. falls / less/more/imports c. falls/more/less / exports O d. rises / less/more/exports e falls / more / less/ imports

Answer 1

1)

e. Fall/more/less/imports

Oats supply increases after Canada bigans to trade with world.

So price decrease in domestic market.

People demand more.

But domestic firm's produce less, because profits decreases than before international trade.

Canada imports oats because of less price in other countries than domestic market price of oats.

Supply↑=>price↓=>consumption↑

Domestic profits of oats↓=>oats production↓

Price of oats in world<domestic price=>Canada imports oats

2)

c. less than

It's correct option

If Canada has comparative advantage,it means cost of production of hardwood is less than cost in rest of the world.

When Canada start trade with world,'Demand' increases.

So price also increases.

Demand↑=>price↑

Price before trade is less that after entering to the international trade.

3)

e.increases domestic imports of good X.

Tariffs are the taxes levied on imports.

Cost on importing good X decreases as government decreased tariffs on good X.

So imports increases (along with demand).

Tariffs on X↓=>price of X/import cost on X↓=>imports↑.