Assume that by devoting all its resources to the production of X, nation Alpha can produce 40 units of X.By devoting all its resources to Y, Alpha can produce 60Y.Comparable figures for nation Beta are, 60X and 40Y.Refer to the above information.Alpha would prefer terms of trade at, or close to, 1X = 2/3 Y.

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Alpha would prefer terms of trade at 1X = 2/3Y because it allows them to trade 1 unit of X for more than the opportunity cost of producing X themselves, which is 1.5Y (60Y/40X).

Assume That by Devoting All Its Resources to the Production