)The opportunity cost of producing one car in Germany is 2,000 bushels ofwheat, and the opportunity cost of producing one car in Canada is 1,200bushels of wheat.The two countries can realize mutual gains from trade ifthey agree on terms of trade that are

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For both countries to benefit from trade, the terms of trade should lie between the opportunity costs of each country. If the terms of trade were greater than 2,000 bushels of wheat per car or less than 1,200 bushels of wheat per car, one country would lose out while the other gains. If Germany only produced wheat or cars, the terms of trade would need to be adjusted accordingly. Therefore, the terms of trade should be greater than 1,200 bushels of wheat per car and less than 2,000 bushels of wheat per car for both countries to benefit from trade.

)The Opportunity Cost of Producing One Car in Germany Is