Question: The United States imports Molson beer from Canada. Assume that Canada and the United States share the same currency and that a bottle of Molson beer costs $2 in Toronto, Canada, but just $1 in Chicago.
a. What market adjustments will ensue in this case, assuming no shipping costs or trade barriers?
b. If Canadians really like Molson beer more than the residents of the United States do, can a price differential persist? Why or why not?