Table 3-3
Assume that Indonesia and India can switch between producing rice and bananas at a constant rate.

-Refer to Table 3-3.At which of the following prices,if any,can India and Indonesia both gain from trade?

Question

Table 3-3
Assume that Indonesia and India can switch between producing rice and bananas at a constant rate.
 
-Refer to Table 3-3.At which of the following prices,if any,can India and Indonesia both gain from trade?

Quizplus · Accepted Answer

At a price of 3/5 units of bananas per unit of rice, Indonesia can gain by specializing in rice (gaining 1/5 units of bananas per unit of rice) and trading with India who can specialize in bananas (gaining 2/5 units of rice per unit of bananas). This mutually beneficial trade allows both countries to gain. At the other two prices, either only one country gains from trade or neither country gains from trade.

Table 3-3 Assume That Indonesia and India Can Switch Between Producing Rice