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.Beta would prefer terms of trade at, or close to, 1X = 1 1/2 Y.

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Nation Beta has a comparative advantage in producing X since it can produce 60 units compared to Alpha's 40 units. Therefore, Beta would prefer to trade more of its Y for Alpha's X in order to benefit from its comparative advantage. If the terms of trade are close to 1X = 1 1/2 Y, Beta would be able to obtain more X in exchange for its Y, which would be beneficial for Beta.

Assume That by Devoting All Its Resources to the Production