Assume that by devoting all its resources to the production of X, nation Alpha can produce 40 units
of X. By devoting all its resources to Y, Alpha can produce 60Y. Comparable ﬁgures for nation Beta
are 60X and 40Y. Alpha would prefer terms of trade at, or close to, 1X = 1½Y.

Question

Quizplus · Accepted Answer

Nation Alpha has a comparative advantage in producing Y since it can produce 60Y compared to Beta's 40Y. Therefore, Alpha would prefer terms of trade where they can trade Y for X at a ratio greater than 1.5Y = 1X in order to benefit from their comparative advantage.

Assume That by Devoting All Its Resources to the Production