You are the Minister of Trade for a small island country with the following annual PPC: You are negotiating a trade agreement with a neighboring island with the following annual PPC: If you offer to give the other island 1 coconut for every 4 fish they give you, then they will:

Question

You are the Minister of Trade for a small island country with the following annual PPC:  You are negotiating a trade agreement with a neighboring island with the following annual PPC:  If you offer to give the other island 1 coconut for every 4 fish they give you, then they will:

Quizplus · Accepted Answer

The other island will accept the offer because their opportunity cost of producing a coconut is greater than 4 fish, while your opportunity cost of a coconut is less than 4 fish. This means that it is more efficient for the other island to produce fish and trade with you for coconuts instead of producing coconuts themselves.

You Are the Minister of Trade for a Small Island