Refer to the information provided in Table 20.5 below to answer the question(s) that follow. Cashews are measured in bushels and tea is measured in pounds (lbs.)
Table 20.5 $\quad $$\quad $$\quad $$\quad $$\text { India} $$\quad $$\quad $$\quad $$\quad $ $\quad $$\text { Vietnam } $
$\begin{array} { c c c c }
\text { Cashews } & \text { Tea } & \text { Cashews } & \text { Tea } \
\hline 0 & 600 & 0 & 600 \
20 & 500 & 20 & 450 \
40 & 400 & 40 & 300 \
60 & 300 & 60 & 150 \
80 & 200 & 80 & 0 \
100 & 100 & - & - \
120 & 0 & - & - \
\hline
\end{array}$
-Refer to Table 20.5. Which terms of trade benefits both countries?
A) 1 bushel of cashews for 4 lbs. of tea
B) 1 bushel of cashews for 6 lbs. of tea
C) 1 lb. of tea for 8 bushels of cashews
D) 1 lb. of tea for 10 bushels of cashews

Question

Refer to the information provided in Table 20.5 below to answer the question(s) that follow. Cashews are measured in bushels and tea is measured in pounds (lbs.)
Table 20.5 $\quad $$\quad $$\quad $$\quad $$\text { India} $$\quad $$\quad $$\quad $$\quad $ $\quad $$\text { Vietnam } $ 
$\begin{array} { c c c c } 
\text { Cashews } & \text { Tea } & \text { Cashews } & \text { Tea } \
\hline 0 & 600 & 0 & 600 \
20 & 500 & 20 & 450 \
40 & 400 & 40 & 300 \
60 & 300 & 60 & 150 \
80 & 200 & 80 & 0 \
100 & 100 & - & - \
120 & 0 & - & - \
\hline
\end{array}$
-Refer to Table 20.5. Which terms of trade benefits both countries?
A) 1 bushel of cashews for 4 lbs. of tea
B) 1 bushel of cashews for 6 lbs. of tea
C) 1 lb. of tea for 8 bushels of cashews
D) 1 lb. of tea for 10 bushels of cashews

Quizplus · Accepted Answer

For trade to benefit both countries, the terms of trade must fall between the opportunity costs of producing the goods in each country. India's opportunity cost of producing 1 bushel of cashews is the amount of tea it has to give up, which decreases from 5 lbs. (going from 600 to 500 lbs. of tea for the first 20 bushels of cashews) to 10 lbs. (going from 100 to 0 lbs. of tea for the last 20 bushels). Vietnam's opportunity cost starts at 7.5 lbs. of tea per bushel of cashews (going from 600 to 450 lbs. of tea for the first 20 bushels) and increases to 15 lbs. (going from 150 to 0 lbs. of tea for the last 20 bushels). A trade of 1 bushel of cashews for 6 lbs. of tea falls between the opportunity costs of both countries, making it beneficial for both.

Refer to the Information Provided in Table 20 \quad \quad

Refer to the Information Provided in Table 20 $\quad$ $\quad$