The table below for the United States and Mexico shows maximum feasible production rates per acre of wheat if no rice is produced and maximum feasible production rates per acre of rice if no
wheat are produced. Assume that the opportunity costs of producing these goods are constant in both countries.
Output per Acre with Trade
Wheat
Rice
United States
80 tons
48 tons
Mexico
55 tons
70 tons
For the United States, the opportunity cost of 1 ton of wheat is tons of rice. (Enter your response rounded to two decimal places.)
has a comparative advantage in wheat, and has a comparative advantage in rice.
Now consider the following table that shows the production and consumption of wheat and rice if there is no trade.
Output per Acre with No Trade
Wheat
Rice
United States
40.0 tons
24.0 tons
Mexico
27.5 tons
35.0 tons
Total output of wheat if the two countries do not trade = tons. (Enter your response rounded to one decimal place.)
Total output of rice if the two countries do not trade = tons. (Enter your response rounded to one decimal place.)
Suppose that trade between residents of the United States and Mexico becomes feasible, the United States increases production of the good for which it has a lower opportunity cost by 20 tons
per acre, and Mexico reduces production of the good for which it has a higher opportunity cost by 20 tons per acre. Suppose also that residents of both countries agree to trade at a rate of exchange
of 1 ton of wheat for 1 ton of rice and that they agree to trade 20 tons of wheat for 20 tons of rice.
Fill in the blanks of the following table, which shows the production of wheat and rice if there is trade. (Enter your responses rounded to one decimal place.)
United States
Mexico
Output per Acre with Trade
Wheat
Rice
tons
12.0 tons
tons
60.5 tons
When nations increase the production of goods for which they have a comparative advantage and engage in international trade, show that consumption gains are possible.
World consumption gains from trade in wheat = tons. (Enter your response rounded to one decimal place.)