Country A can produce either 1,000 tons of food or 800 tractors in a given month.Country B can produce either 1,500 tons of food or 1,000 tractors in the same time period.In this situation,it is clear that trade would occur if the terms of trade were

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Trade would occur if both countries benefit from the exchange. Country A has a comparative advantage in food production (1,000 food units per 800 tractors vs. 1,500 food units per 1,000 tractors in Country B), and Country B has a comparative advantage in tractor production. The terms of trade must make it beneficial for both to trade compared to their domestic production possibilities. Option B, where 1 unit of food equals 0.7 tractor, allows both countries to trade based on their comparative advantages, making trade mutually beneficial.

Country a Can Produce Either 1,000 Tons of Food or 800