Question

In Exercise 19.31, 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 ask price refers to the tradeable or relative price comparing which the country takes decision whether or not to engage in trade.

Step2. Explanation

If the ask 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 ask for 500 or more barrels of oil in return of 1000 or less tons of lumber.

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

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