Use the following to answer question(s): Production Possibilities Schedule for Two Commodities

-(Exhibit: Production Possibilities Schedule for Two Commodities) Assuming constant costs in the neighborhood of their current levels of production, the exhibit shows the number of units of commodity X each country would have to forgo to produce the additional units of commodity Y indicated.Further assume that the only input is labor and that it remains fully employed.If there were unrestricted trade and specialization according to the law of comparative advantage:

Question

Use the following to answer question(s): Production Possibilities Schedule for Two Commodities
 
-(Exhibit: Production Possibilities Schedule for Two Commodities) Assuming constant costs in the neighborhood of their current levels of production, the exhibit shows the number of units of commodity X each country would have to forgo to produce the additional units of commodity Y indicated.Further assume that the only input is labor and that it remains fully employed.If there were unrestricted trade and specialization according to the law of comparative advantage:

Quizplus · Accepted Answer

According to the law of comparative advantage, a country should specialize in producing and exporting the good in which it has a lower opportunity cost, while importing the good in which it has a higher opportunity cost. In this case, the opportunity cost of producing Y for the United States is lower than the opportunity cost of producing X, while for Canada, the opportunity cost of producing X is lower than the opportunity cost of producing Y. Therefore, the United States would specialize in producing and exporting Y, while Canada would specialize in producing and exporting X. As a result, the United States would export Y and import X, while Canada would export X and potentially import Y from other countries.

Use the Following to Answer Question(s): Production Possibilities Schedule for Two