Question 24

Canada will export aluminum, and the United States will export food.

Given the opportunity costs, Canada has a comparative advantage in producing aluminum, while the United States has a comparative advantage in producing food. Therefore, Canada is expected to export aluminum, and the United States will export food to each other.

A) Canada will export aluminum, and the United States will export food.

This option is correct as it aligns with the principle of comparative advantage. Canada’s lower opportunity cost in aluminum production enables it to specialize and export this good, while the U.S., with a lower opportunity cost in food production, will focus on exporting food.

B) Canada will import aluminum, and the United States will import aluminum, and the United States will export food.

This option is incorrect as it contradicts the comparative advantage principle. If Canada has a lower opportunity cost in aluminum, it will not import aluminum but rather export it, making this trade flow unrealistic.

C) Canada will export aluminum, and the United States will import food.

This option is also incorrect because it suggests that the U.S. would import food, despite having a comparative advantage in food production. The expected trade flow would involve the U.S. exporting food instead.

D) Canada will import aluminum, and the United States will export food.

This option is incorrect as it also contradicts the comparative advantage. Canada, having a lower opportunity cost for aluminum, will export it rather than import it, while the U.S. will export food.

Conclusion

The correct answer, A, effectively captures the expected trade flow based on the comparative advantages of both countries. Canada will export aluminum due to its lower opportunity cost, while the United States will export food for the same reason. All other options fail to recognize the fundamental economic principle of comparative advantage, leading to inaccurate trade predictions.