Assume that in the United States, the opportunity cost of one bottle of wine is four loaves of bread, while in France, the opportunity cost of one bottle of wine is two loaves of bread. If the terms of trade are three loaves of bread for one bottle of wine:

Question

Quizplus · Accepted Answer

Both countries benefit from trade because the terms of trade (3 loaves of bread for 1 bottle of wine) are between their respective opportunity costs, allowing each country to trade at a lower opportunity cost than producing the good themselves.

Assume That in the United States, the Opportunity Cost of One