Under free trade, Canada would not realize any gains from trade with Sweden if Canada ?
Correct answer: A. Trades at Canada's marginal rate of transformation
- A. Trades at Canada's marginal rate of transformation
- B. Trade at Sweden's marginal rate of transformation
- C. Specializes completely in the production of its export good
- D. Specializes partially in the production of its exports goods
Explanation
Trade produces gains when the international terms of trade differ favourably from a country’s own marginal rate of transformation. If Canada trades at its own marginal rate of transformation, it faces no better exchange rate than under domestic production, so there is no gain.
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