If Japan has a comparative advantage over the United States in the production of new cars and can sell a new car for an average price of $22,000, while the United States can sell a new car for an average price of $25,000, if the two countries engage in trade, the terms of trade will:

Question

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The terms of trade will lie between the opportunity costs of the two countries, which in this case are represented by the prices of $22,000 and $25,000.

If Japan Has a Comparative Advantage Over the United States