You are the Minister of Trade for a small island country in the South Pacific with the following annual production possibilities curve:
You are negotiating a deal with a neighboring island that has the following annual PPC:
Refer to the figure above.If you offer to give the other island 400 coconuts in exchange for 1,500 fish:
A) they will refuse your offer because it makes them worse off than producing on their own.
B) they will accept your offer because it keeps them on their original PPC,and so is efficient.
C) they will accept your offer because it gives them 800 coconuts,which is more than they can make on their own.
D) they will accept your offer because it allows them to consume a combination of fish and coconuts that would be unattainable on their own.

Question

You are the Minister of Trade for a small island country in the South Pacific with the following annual production possibilities curve: 
You are negotiating a deal with a neighboring island that has the following annual PPC: 
Refer to the figure above.If you offer to give the other island 400 coconuts in exchange for 1,500 fish:
A) they will refuse your offer because it makes them worse off than producing on their own. 
B) they will accept your offer because it keeps them on their original PPC,and so is efficient. 
C) they will accept your offer because it gives them 800 coconuts,which is more than they can make on their own. 
D) they will accept your offer because it allows them to consume a combination of fish and coconuts that would be unattainable on their own.

Quizplus · Accepted Answer

Their opportunity cost of a coconut is 5 fish.By giving them more than 300 coconuts in exchange for 1500 fish,you make them better off than they would be without trade.

You Are the Minister of Trade for a Small Island