Guns

100

Canada

Great Britian

200 400 Butter

Both countries can produce either guns or butter using the resources that each country has.

1. Which country has the absolute advantage in the production of guns? Explain.

2. Which country has the absolute advantage in the production of butter? Explain.

3. Which country has the comparative advantage in the production of guns? Explain.

4. Which country has the comparative advantage in the production of butter? Explain.

5. Looking at butter for guns, what would be a good terms of trade?