The "terms of trade" principle refers to the statement that
A)the terms of trade must be clearly stated before any trade takes place.
B)specialization and trade shifts out the world's PPC.
C)specialization and trade move the world closer to its PPC.
D)each producer will gain from specialization and trade as long as the terms of trade are between the producers' opportunity costs of production.

Question

Quizplus · Accepted Answer

The "terms of trade" principle relates to the exchange of goods and services in international trade. If the terms of trade are such that each producer gains from specialization and trade as long as the terms of trade are between the producers' opportunity costs of production, then both parties will benefit from the trade. Therefore, option D is the correct choice.

The "Terms of Trade" Principle Refers to the Statement That