Suppose Canada can produce either 300 tons of paper or 200 HDTVs,and India can produce either 200 tons of paper or 100 HDTVs.The terms of trade between the two countries will lie between

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Canada can produce 300 tons of paper or 200 HDTVs, so the opportunity cost of producing 1 ton of paper is 2/3 of an HDTV. India can produce 200 tons of paper or 100 HDTVs, so the opportunity cost of producing 1 ton of paper is 1/2 of an HDTV. Therefore, the terms of trade between the two countries will lie between 1/2 and 2/3 of an HDTV per ton of paper.

Suppose Canada Can Produce Either 300 Tons of Paper or 200