Suppose the U.S. can produce 10 units of food and 5 units of clothing (or any such linear combination) and Canada can produce 6 units of food and 4 units of clothing (or any such linear combination). If trade occurs between these two countries, which should produce more food and which more clothing?
What will be an ideal response?
The U.S. has a comparative advantage in food, 5/10 < 4/6. Canada has a comparative advantage in clothing, 5/10 < 4/6. The U.S. should produce food and Canada should produce clothing.
Economics
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