Imagine that the United States and Mexico produce only sugar and oil. The United States can produce a barrel of oil at an opportunity cost of 2 tons of sugar, whereas Mexico can produce a barrel of oil at an opportunity cost of 3 tons of sugar. Fill in the blanks to complete the passage. Drag word(s) below to fill in the blank(s) in the passage.

If Mexico and the United States faced these opportunity cost, then to benefit from trade Mexico should specialize in producing –. That is, – would use some of the oil it produces and export the rest to – in exchange for sugar. In order for the trade to be beneficial to both nations, the trade ratio must be between 2 and – tons of sugar per barrel of oil.

If Mexico and the United States faced these opportunity cost, then to benefit from trade Mexico should specialize in producing OIL–. That is, UNITED STATES– would use some of the oil it produces and export the rest to MEXICO– in exchange for sugar. In order for the trade to be beneficial to both nations, the trade ratio must be between 2 and 3– tons of sugar per barrel of oil.

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