The figure below shows Arcticland's annual production possibilities boundary for the production of fish and ice. FIGURE 33- 4
-Refer to Figure 33- 4. Suppose that a trading partner offers to give Arcticland some fish in exchange for its ice. If Arcticland is to improve its consumption possibilities, the terms of trade must be 1 tonne of fish for

Question

The figure below shows Arcticland's annual production possibilities boundary for the production of fish and ice.  FIGURE 33- 4
-Refer to Figure 33- 4. Suppose that a trading partner offers to give Arcticland some fish in exchange for its ice. If Arcticland is to improve its consumption possibilities, the terms of trade must be 1 tonne of fish for

Quizplus · Accepted Answer

According to the production possibilities boundary, Arcticland produces fish and ice at a 1:1 ratio (i.e. for every tonne of fish produced, it must sacrifice a tonne of ice). Therefore, the terms of trade that would improve Arcticland's consumption possibilities would be 1 tonne of fish for 1 tonne of ice, or a ratio of 1:1. Answer choice E is the only option that fits this criteria.

The Figure Below Shows Arcticland's Annual Production Possibilities Boundary for the Production