1. Assume that the comparative-cost ratios of two products—

baby formula and tuna fish—are as follows in the nations of Canswicki and Tunata: [LO19.1]

Canswicki: 1 can baby formula = 2 cans tuna fish Tunata: 1 can baby formula = 4 cans tuna fish In what product should each nation specialize? Which of the following terms of trade would be acceptable to both nations:

(a) 1 can baby formula = 2½ cans tuna fish;

(b) 1 can baby formula

= 1 can tuna fish;

(c) 1 can baby formula = 5 cans tuna fish?