Answer the question on the basis of the following information.Assume that by devoting all its resources to the production of X,nation Alpha can produce 20 units of X.By devoting all its resources to Y,Alpha can produce 30Y.Comparable figures for nation Beta are 60X and 40Y.
Refer to the given information.Alpha would prefer terms of trade at,or close to,1X = ²/₃Y.

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Quizplus · Accepted Answer

Since Alpha has a comparative advantage in producing X, it would prefer to trade X for foreign currency at a higher rate than the domestic rate of X in terms of Y. The suggested formula for terms of trade would mean that Alpha values 1 unit of X at a higher price than 1 unit of Y, which aligns with their comparative advantage. Therefore, Alpha would prefer terms of trade at or close to this formula.

Answer the Question on the Basis of the Following Information