Question

Suppose that the United States and Canada each produce only two products, televisions and food. The United States can produce 100 televisions a day, 150 pounds of food a day, or any combination in between. (For example, it could choose 100 televisions and no food, 50 televisions and 75 pounds of food, or 150 pounds of food and no televisions.) Canada can produce 300 televisions a day, 330 pounds of food a day, or any combination in between. Which of these trades could make both the United States and Canada better off?

The United States could trade Canada 20 pounds of food for 17 televisions.

The United States could trade Canada 60 pounds of food for 75 televisions.

The United States could trade Canada 100 pounds of food for 98 televisions.

Answer 1

The United States could trade Canada 20 pounds of food for 17 televisions.

The US receives TV at a rate of 17/20 = 0.85 which is higher than their opportunity cost therefore, making a gain

While Canada receive TV at a rate lower than their economy can produce them (0.85<0.9090) thus, also making a gain

Step-by-step explanation:

US

100 television or 150 pounds of food

Opportunity cost: of TV 1.5 pounds of food

Opportunity cost of food: 2/3 of a TV

CANADA

300 televisions or 330 food

Opportunity cost: of TV 1.1 pounds of food

Opportunity cost of food: 90/99 of a TV

It is cheaper for canada to produce TV and cheaper for the US to produce food.