Table 19-12
Production and
Consumption Production
Without Trade With Trade
$$\begin{array} { | l | l | l | l | l | l | }
\hline & \text { Swards } & \text { Beltr } & & \text { Svards } & \text { Beltr } \
\hline \text { Estoria } & 100 & 50 && 200 & 0 \
\hline \text { Morocco } & 50 & 40 && 0 & 120 \
\hline
\end{array}$$
Estonia and Morocco can produce both swords and belts.Table 19-12 shows the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 19-12.All of the following are terms of trade that could possibly benefit both countries except

Question

Table 19-12
Production and
Consumption Production
Without Trade With Trade
 $$\begin{array} { | l | l | l | l | l | l | } 
\hline & \text { Swards } & \text { Beltr } & & \text { Svards } & \text { Beltr } \
\hline \text { Estoria } & 100 & 50 && 200 & 0 \
\hline \text { Morocco } & 50 & 40 && 0 & 120 \
\hline
\end{array}$$ 
Estonia and Morocco can produce both swords and belts.Table 19-12 shows the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 19-12.All of the following are terms of trade that could possibly benefit both countries except

Quizplus · Accepted Answer

In order for both countries to benefit from trade, the terms of trade must fall between the opportunity costs of producing swords and belts in each country.

In Estonia, the opportunity cost of producing 1 sword is 2 belts (100/50), while in Morocco the opportunity cost of producing 1 sword is 1.25 belts (50/40).

Therefore, the terms of trade that could benefit both countries are those that fall between these opportunity costs.

Option A: 2/3 of a belt : 1 sword is a better deal for Estonia (as their opportunity cost of producing swords is higher), but not for Morocco. 
Option B: 3/5 of a belt : 1 sword is a better deal for both countries, and therefore could benefit both. 
Option C: 7/10 of a belt : 1 sword is a better deal for Morocco (as their opportunity cost of producing swords is lower), but not for Estonia. 
Option D: 1/4 of a belt : 1 sword is a better deal for Estonia (as their opportunity cost of producing swords is higher), but not for Morocco.

Therefore, the best choice is option B: 3/5 of a belt : 1 sword.

Table 19-12 Production and Consumption Production Without Trade with Trade

Table 19-12
Production and
Consumption Production
Without Trade with Trade