-Refer to Exhibit 34-1.Considering the data,which of the following terms of trade would both countries agree to?
A) 1 unit of X for 2 units of Y
B) 1 unit of X for 3 units of Y
C) 1 unit of X for 1 unit of Y
D) 1 unit of X for 1.50 units of Y
E) all of the above

Question

-Refer to Exhibit 34-1.Considering the data,which of the following terms of trade would both countries agree to?
A) 1 unit of X for 2 units of Y 
B) 1 unit of X for 3 units of Y 
C) 1 unit of X for 1 unit of Y 
D) 1 unit of X for 1.50 units of Y 
E) all of the above

Quizplus · Accepted Answer

Both countries would agree to a terms of trade that is mutually beneficial, which typically falls between their opportunity costs. Without specific data from Exhibit 34-1, option D is a reasonable compromise between the extremes.