FIGURE 3 THE GAINS FROM SPECIALIZATION AND TRADE TO THE UNITED STATES AND CANADA
imageAssume Canada specializes in beef. If the two countries want to continue consuming 60 million sides of beef between them, the United States needs to produce only 20 million. This frees up resources for the United States to begin producing more guitars. Because each side of beef in the United States costs 1 guitar to produce, reducing beef output by 20 million means that 20 million more guitars can be produced. When the two countries trade their surplus products, both are better off than before.