menu
bartleby
search
close search
Hit Return to see all results
close solutoin list

The world price of wine is below the price that would prevail in Canada in the absence of trade. a. Assuming that Canadian imports of wine are a small part of total world wine production, draw a graph for the Canadian market for wine under free trade. Identify consumer surplus, producer surplus, and total surplus in an appropriate table. b. Now suppose that an unusual shift of the Gulf Stream leads to an unseasonably cold summer in Europe, destroying much of the grape harvest there. What effect does this shock have on the world price of wine? Using your graph and table from part (a), show the effect on consumer surplus, producer surplus, and total surplus in Canada. Who are the winners and losers? Is Canada as a whole better or worse off?

BuyFindarrow_forward

Principles of Macroeconomics (Mind...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305971509

Solutions

Chapter
Section
BuyFindarrow_forward

Principles of Macroeconomics (Mind...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305971509
Chapter 9, Problem 1PA
Textbook Problem
537 views

The world price of wine is below the price that would prevail in Canada in the absence of trade.

a. Assuming that Canadian imports of wine are a small part of total world wine production, draw a graph for the Canadian market for wine under free trade. Identify consumer surplus, producer surplus, and total surplus in an appropriate table.

b. Now suppose that an unusual shift of the Gulf Stream leads to an unseasonably cold summer in Europe, destroying much of the grape harvest there. What effect does this shock have on the world price of wine? Using your graph and table from part (a), show the effect on consumer surplus, producer surplus, and total surplus in Canada. Who are the winners and losers? Is Canada as a whole better or worse off?

Subpart (a):

To determine
The impact of international trade.

Explanation of Solution

When the domestic price of the commodity is higher (P) than the price in the foreign countries (P1), it denotes that the domestic country is not able to produce the good at lower opportunity cost than the foreign countries. The ability to produce the good at lower opportunity cost is known as the comparative advantage and thus when there is an international trade opening in the country, the country will become importer. The situation can be illustrated as follows:

Sub part (b):

To determine
The impact of international trade.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Chapter 9 Solutions

Principles of Macroeconomics (MindTap Course List)
Show all chapter solutions
add

Additional Business Textbook Solutions

Find more solutions based on key concepts
Show solutions add
Is unemployment typically short-term or long-term? Explain.

Brief Principles of Macroeconomics (MindTap Course List)

Describe the major leadership styles.

Foundations of Business (MindTap Course List)

Define depreciation as it relates to a van you bought for your business.

College Accounting (Book Only): A Career Approach

In the text, we discussed using the discounted dividend model to estimate a stocks intrinsic value. To keep thi...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)