1.
Figure 34-2
Coal
Paper
Canada
6 tons
1 ton
United States
4 tons
2 tons
In Figure 34-2, what are the limits on the terms of trade for 1 ton of paper?
Select one:
a. Between 1/2 ton of coal and 2 tons of coal
b. Between 1/2 ton of coal and 6 tons of coal
c. Between 1/6 ton of coal and 6 tons of coal
d. Between 2 tons of coal and 6 tons of coal
e. Between 1/6 ton of coal and 1/2 ton of coal
The export supply curve shows the amount of the home country's
Select one:
a. surplus at various prices below the "no-trade" equilibrium.
b. shortage at various prices below the "no-trade" equilibrium.
c. equilibrium "no-trade" quantity.
d. surplus at various prices above the "no-trade" equilibrium.

2.
e. shortage at various prices above the "no-trade" equilibrium.
Coal Paper
Canada 6 tons 1 ton
United States 4 tons 2 tons
Solution
The limits on the terms of trade for 1 ton of paper is e) Between 1/6 ton of coal and 1/2 ton of
coal. This is because country canada can either produce one ton of paper or one ton of coal (1/6)
and united states can produce either 2 tons of paper or four tons of coal (2/4 or 1/2).
The export supply curve shows the amount of the home country's shortage at various prices
below the no-trade equillibrium