economics

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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.

Wheat Corn

USA 4 2

Canada 5 8



In this case, which country should produce wheat? Why? Hint: CALCULATE THE OPPORTUNITYCOST 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.

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