In a two-country model,equilibrium world prices and equilibrium quantities of exports and imports occur where one nation's export supply curve intersects the other nation's import demand curve.

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This statement is true according to the theory of comparative advantage and trade. Countries specialize in producing goods in which they have a comparative advantage and trade with other countries to obtain goods in which they have a comparative disadvantage. Equilibrium prices and quantities of trade occur where the supply and demand curves intersect. In a two-country model, the intersection of one nation's export supply curve and the other nation's import demand curve determines the equilibrium world prices and quantities of exports and imports.

In a Two-Country Model,equilibrium World Prices and Equilibrium Quantities of Exports