To ensure mutually beneficial trade,the terms of trade between two countries should always

Question

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The terms of trade should be based on the comparative advantage of each country, which is reflected in their respective opportunity costs of production. A fair trade will ensure that both countries benefit from the exchange and that there is an overall gain from trade. Allowing each country to develop its area of absolute advantage may not be efficient as it may lead to suboptimal production and missed opportunities for gains from trade. Favouring the larger country is also unfair and may lead to exploitation of the smaller country.

To Ensure Mutually Beneficial Trade,the Terms of Trade Between Two