Opportunity Costs and Consumption Levels in the United States and Canada

• If the United States wants to consume 500 footballs in autarky, how much lumber can it consume at most?
• If Canada wants to consume 1 ton of lumber in autarky, how many footballs can it consume?

The United States can consume up to 5 tons of lumber in autarky. Canada can consume 1 ton of lumber in autarky.

Understanding Opportunity Costs and Consumption Levels

Opportunity cost refers to the value of the next best alternative foregone when a choice is made. In the context of trade and production, understanding opportunity costs is crucial in determining the most efficient allocation of resources.

United States Consumption Levels

The United States can produce either 10 tons of lumber or 1,000 footballs with constant opportunity costs. Given the choice to consume 500 footballs, the United States must give up producing 500 footballs, allowing it to produce 5 tons of lumber (10 tons - 500 footballs/1,000 footballs per ton).

Canada Consumption Levels

Canada, on the other hand, can produce either 8 tons of lumber or 400 footballs. If Canada wants to consume 1 ton of lumber, it must give up producing 7 tons of lumber (8 tons - 1 ton), thus enabling it to consume 1 ton of lumber and produce 400 footballs.

By understanding and calculating opportunity costs, both countries can maximize their consumption levels and resource utilization in autarky.