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 60 Y. Comparable figures for nation Beta are 60 X and 40 Y. Beta would prefer terms of trade at, or close to, 1X = 1½Y.

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Nation Beta has a comparative advantage in producing X, while Alpha has a comparative advantage in producing Y. Beta would prefer terms of trade that reflect its comparative advantage, such as 1X = 1½Y, to maximize its gains from trade.

Assume That by Devoting All Its Resources to the Production