In the computers and shirts example from the chapter, the United States traded one computer to Mexico in exchange for three shirts. This is not just an arbitrary ratio of shirts to computers, however. Let’s explore the terms of trade a little bit more.

a. Why is trading away a computer for three shirts a good trade for the United States?

Why is it also a good deal for Mexico?

b. What if instead the agreed upon terms of trade was one computer for eight shirts—

would this trade still benefit both the U.S.

and Mexico?

c. What is the maximum (and minimum)

number of shirts that a computer can trade for if the U.S. and Mexico are both to benefit from the trade? pg85