How Much Should Canada Ask for to Gain from Trading with Venezuela?

What should Canadians ask for if they want to gain from trading with Venezuela?

Oil and Lumber Production in Canada and Venezuela

Country Oil (barrels) Lumber (tons)

Canada 20 or 40

Venezuela 60 or 30

Final answer:

Answer:

To gain from trading with Venezuela, Canadians should ask for an amount of oil that is greater than the amount of lumber they gave up.

To determine how much oil Canadians should ask for in return for giving up 1,000 tons of lumber, we need to consider their production possibilities and comparative advantage. If Canadians specialize completely in lumber, they can produce 40 tons. In order to be as well off as they were with no trade, they should ask for an amount of oil that is equal to the amount of lumber they gave up. However, if they want to gain from trading with Venezuela, they should ask for an amount of oil that is greater than the amount of lumber they gave up.

The Canadian "ask" for oil may not be beneficial for Venezuelans if their production possibilities show that they have a comparative advantage in oil. Without the information on Venezuela's production possibilities, we cannot determine this conclusively.