Figure 34-7

-In Figure 34-7, CF has the same slope as BG.AB and CD are the production possibilities of Pestoland and Pastaland, respectively.If both countries are given the opportunity to trade at prices indicated by CF,
A)both will refuse trade.
B)both will agree to trade.
C)Pestoland will wish to trade, but Pastaland will not.
D)Pastaland will wish to trade, but Pestoland will not.

Question

Figure 34-7
​ 
-In Figure 34-7, CF has the same slope as BG.AB and CD are the production possibilities of Pestoland and Pastaland, respectively.If both countries are given the opportunity to trade at prices indicated by CF,
A)both will refuse trade. 
B)both will agree to trade. 
C)Pestoland will wish to trade, but Pastaland will not. 
D)Pastaland will wish to trade, but Pestoland will not.

Quizplus · Accepted Answer

The slope of CF indicates the terms of trade, which are beneficial for both countries. Since both countries have the opportunity to gain from trading, they would agree to trade. Therefore, the correct answer is B.

Figure 34-7 ​

Figure 34-7