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

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Under the given terms of trade, the US can sell three loaves of bread to France and receive one bottle of wine in exchange. The opportunity cost of three loaves of bread in the US is three-fourths of a bottle of wine (since it is the same as the opportunity cost of one loaf, which is one-fourth of a bottle). Thus, the US is giving up less than one bottle of wine to acquire one bottle of wine from France. Similarly, France can sell two loaves of bread to the US and receive one bottle of wine in exchange. The opportunity cost of two loaves of bread in France is one-half of a bottle of wine (since it is the same as the opportunity cost of one loaf, which is one-half of a bottle). Thus, France is giving up less than one bottle of wine to acquire one bottle of wine from the US. In both cases, the opportunity cost of acquiring a bottle of wine through trade is lower than producing it domestically, which means both countries can benefit from trade.

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