posted by roxanne on .
Suppose the USA and Canada are considering to trade. Assume there are only two goods in the economy: wheat and corn. The table below illustrates what each country can produce in a given year.
USA 4 2
Canada 5 8
In this case, which country should produce wheat? Why? Hint: calculate the opportunity cost for each country. For instance, USA can produce 4 units of wheat OR 2 units of Corn. In this case, if the USA produces one unit of corn, then it has to give up 2 units of wheat. Be sure to review the handout for this module