If the opportunity cost is 2X = 1Y for country A and 1/3X = 1Y for country B, then a possible terms of trade is:

Question

Quizplus · Accepted Answer

The opportunity cost of producing 1 unit of X in country A is 2 units of Y, while in country B it is 1/3 units of Y. This means that country A has a comparative advantage in producing X, while country B has a comparative advantage in producing Y. Therefore, a possible terms of trade is 1 unit of X for 1 unit of Y, which would allow both countries to specialize in producing the goods in which they have a comparative advantage.

If the Opportunity Cost Is 2X = 1Y for Country