Question

In Exercise 33.31, is there an “ask” where Venezuelans may say “no thank you” to trading with Canada?

Short answer

Yes.

Step-by-step solution

Step1. Introduction

When two countries trade, the asking price refers to the tradeable or relative price comparing which the country decides whether or not to engage in trade.

Step2. Explanation

If the asking price is absurd, or they can domestically produce it at a cheaper rate, the country will refuse to trade.

In our case of question 19.31, Venezuela may refuse to trade with Canada, i.e. say "no thank you" if Canada asks for 500 or more barrels of oil in return for 1000 or fewer tons of lumber.

It is so because Venezuela produces oil and lumber in the ratio of 6000/3000= 2:1.

Hence, in such a scenario, Venezuela may choose to say "no thank you" to the trade deal with Canada.