Below is some hypothetical data for the countries of Canada and Mexico.(Assume that Canada has 10 million workers per month available and Mexico has 20 million. )
Canada's Production Possibilities
(Output in millions of bushels per month)
Mexico's Production Possibilities
(Output in millions of bushels per month)
Output Before Trade
(Output in millions of bushels per month)

-Refer to the information above to answer this question.Which of the following would be feasible terms of trade between the two countries?

Question

Below is some hypothetical data for the countries of Canada and Mexico.(Assume that Canada has 10 million workers per month available and Mexico has 20 million. )
Canada's Production Possibilities
(Output in millions of bushels per month)
  Mexico's Production Possibilities
(Output in millions of bushels per month)
  Output Before Trade
(Output in millions of bushels per month)
 
-Refer to the information above to answer this question.Which of the following would be feasible terms of trade between the two countries?

Quizplus · Accepted Answer

From the production possibilities chart, Canada has a comparative advantage in producing beans, while Mexico has a comparative advantage in producing rye. Feasible terms of trade between the two countries should reflect this comparative advantage, creating a mutually beneficial exchange. Based on the data provided, one bushel of beans for 1.25 bushels of rye would benefit both countries. Canada would be able to obtain more rye than it could produce itself by trading its beans, while Mexico would be able to obtain more beans than it could produce itself by trading its rye. Thus, this would be the feasible terms of trade between the two countries.

Below Is Some Hypothetical Data for the Countries of Canada