Tomatoes and potatoes are produced in both U.S. and Canada. U.S. can produce as much as 180,000 kg of tomatoes or at most 135,000 kg of potatoes in a year. Canada can produce 80,000 kg of tomatoes and 120,000 kg of potatoes.

Which country has a comparative advantage in producing tomatoes and which country has a comparative advantage in producing potatoes? Explain.

(b)What would be the world gain in kg of tomatoes if the country has comparative advantage in the production of potatoes produces 30,000 kg more of potatoes and the other country produces 30,000 kg fewer of potatoes? What would be Canada's gain in kg of tomatoes if the two countries agree to trade 1 kg of potatoes for 1.05 kg of tomatoes?

(c)What would be the world gain in kg of potatoes if the country has comparative advantage in the production of tomatoes produces 30,000 kg more of tomatoes and the other country produces 30,000 kg fewer of tomatoes? What would be Canada's gain in kg of potatoes if the two countries agree to trade 1 kg of tomatoes for 1.05 kg of potatoes?

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a To determine which country has a comparative advantage in producing tomatoes and potatoes we need to calculate the opportunity costs for each countr... View the full answer