If Nations Quirk and Turk only produce aluminum or oil, the accompanying table shows the maximum output of each nation. $ \quad$$ \quad$$ \quad$$ \quad$$ \quad$$ \quad$$ \quad$$\text { Output (Units) }$
$\begin{array}{c|c|c|}
\hline \text { Nations } & \text { Aluminum } & \text { Oil } \
\hline \text { Quirk } & 20 & 40 \
\hline \text { Tunk } & 30 & 90\
\hline
\end{array}$ Which one of the following terms of trade is most likely to produce mutually beneficial exchange between the two nations?

Question

If Nations Quirk and Turk only produce aluminum or oil, the accompanying table shows the maximum output of each nation. $ \quad$$ \quad$$ \quad$$ \quad$$ \quad$$ \quad$$ \quad$$\text { Output (Units) }$
$\begin{array}{c|c|c|}
\hline \text { Nations } & \text { Aluminum } & \text { Oil } \
\hline \text { Quirk } & 20 & 40 \
\hline \text { Tunk } & 30 & 90\
\hline 
\end{array}$ Which one of the following terms of trade is most likely to produce mutually beneficial exchange between the two nations?

Quizplus · Accepted Answer

The opportunity cost of producing 1 unit of aluminum in Quirk is 2 units of oil, while in Turk it is 3 units of oil. Similarly, the opportunity cost of producing 1 unit of oil in Quirk is 0.5 units of aluminum, while in Turk it is 0.33 units of aluminum. Therefore, the terms of trade that are most likely to produce mutually beneficial exchange are those that lie between 0.5 units of oil for 1 unit of aluminum and 1 unit of oil for 0.4 units of aluminum.

If Nations Quirk and Turk Only Produce Aluminum or Oil \quad

If Nations Quirk and Turk Only Produce Aluminum or Oil $\quad$