If there are only two nations, one nation's exports are the
Other's imports; which of the following is identical for both
Nations?
A)only the equilibrium relative price of the first nation's exports
B)only the opportunity cost of the first nation's exports
C)neither the equilibrium relative price nor the opportunity cost of the first nation's exports
D)both the equilibrium relative price and the opportunity cost of the first nation's exports

Question

If there are only two nations, one nation's exports are the
Other's imports; which of the following is identical for both
Nations?
A)only the equilibrium relative price of the first nation's exports 
B)only the opportunity cost of the first nation's exports 
C)neither the equilibrium relative price nor the opportunity cost of the first nation's exports 
D)both the equilibrium relative price and the opportunity cost of the first nation's exports

Quizplus · Accepted Answer

Both the equilibrium relative price and the opportunity cost of the first nation's exports must be identical for both nations because in a two-nation model, one nation's exports are the other nation's imports. Therefore, the relative prices and opportunity costs of traded goods in one nation must be the same as the relative prices and opportunity costs of the same goods in the other nation.

If There Are Only Two Nations, One Nation's Exports Are