In the United States, one worker can produce 10 tons of steel per day or 20 tons of chemicals per day. In the United Kingdom, one worker can produce 5 tons of steel per day or 15 tons of chemicals per day. The United Kingdom will gain the most from trade (and trade will be feasible) if 1 ton of steel trades for:
A) 2 tons of chemicals.
B) 3 tons of chemicals.
C) 1.5 tons of chemicals.
D) 0.5 ton of chemicals.

Question

Quizplus · Accepted Answer

In the United States, the opportunity cost of producing 1 ton of steel is 2 tons of chemicals (10 tons of steel / 5 tons of chemicals). In the United Kingdom, the opportunity cost of producing 1 ton of steel is 3 tons of chemicals (5 tons of steel / 1.5 tons of chemicals). Therefore, the United Kingdom will gain the most from trade if 1 ton of steel trades for 3 tons of chemicals.

In the United States, One Worker Can Produce 10 Tons