The opportunity cost of a table is 5 chairs in Nation A and 1 chair in Nation B.If the countries specialize and trade,an acceptable terms of trade for both countries would be 3 chairs per table.

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In Nation A, the opportunity cost of producing a table is 5 chairs, while in Nation B, the opportunity cost of producing a table is only 1 chair. This means that Nation B has a comparative advantage in producing tables, while Nation A has a comparative advantage in producing chairs. By specializing in the production of the good in which they have a comparative advantage and then trading with each other, both countries can benefit. Under an acceptable terms of trade of 3 chairs per table, both countries would be willing to trade. Nation A would be willing to give up 3 chairs to obtain one table, which is less than its opportunity cost of 5 chairs per table. Nation B would be willing to give up one table to obtain 3 chairs, which is more than its opportunity cost of 1 chair per table. This mutually beneficial trade would result in a gain in overall output and welfare for both countries.

The Opportunity Cost of a Table Is 5 Chairs in Nation