Use the following to answer questions:
Figure: The Production Possibilities for Two Countries
-(Figure: The Production Possibilities for Two Countries) Look at the figure The Production Possibilities for Two Countries. Trade will NOT take place if 1 radio trades for:

Question

Use the following to answer questions:
Figure: The Production Possibilities for Two Countries 
-(Figure: The Production Possibilities for Two Countries) Look at the figure The Production Possibilities for Two Countries. Trade will NOT take place if 1 radio trades for:

Quizplus · Accepted Answer

Trade will not take place if the opportunity cost of one good in terms of the other is the same for both countries. In this case, the opportunity cost of producing radios is lower for Country A and the opportunity cost of producing tires is lower for Country B. Therefore, if Country A produces and trades radios for tires, it should only do so if it can acquire tires at a lower opportunity cost than if it produced them domestically. This means Country A should only trade if it can get 4 radios for 1 tire, which is equivalent to 1 radio for 0.25 tires. Any other trade rate would be less beneficial for Country A.

Use the Following to Answer Questions