Assume that by devoting all its resources to the production of X,nation Alpha can produce 40 units of X.By devoting all its resources to Y,Alpha can produce 60Y.Comparable figures for nation Beta are,60X and 40Y.
-Refer to the above information.Beta would prefer terms of trade at,or close to,1X = 1 1/2 Y.

Question

Quizplus · Accepted Answer

Nation Beta has a comparative advantage in producing X as it can produce 60 units of X as compared to Alpha's 40 units. On the other hand, Alpha has a comparative advantage in producing Y as it can produce 60Y as compared to Beta's 40Y. Therefore, it is likely that Beta would prefer to trade X for Y at a ratio of 1X = 1 1/2 Y, as it values Y more than X.

Assume That by Devoting All Its Resources to the Production