Table 9-11
Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-11 shows the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 9-11. All of the following are terms of trade that could possibly benefit both countries except
A) 1 hat : 2 clocks
B) 1 hat : 4 clocks
C) 1 hat : 5 clocks
D) 1 hat : 8 clocks

Question

Table 9-11
Production and
Consumption Production
Without Trade With Trade
  Denmark and Belize can produce both clocks and hats. Table 9-11 shows the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 9-11. All of the following are terms of trade that could possibly benefit both countries except
A) 1 hat : 2 clocks 
B) 1 hat : 4 clocks 
C) 1 hat : 5 clocks 
D) 1 hat : 8 clocks

Quizplus · Accepted Answer

For both countries to benefit from trade, the terms of trade must lie between their opportunity costs. If 1 hat is traded for 8 clocks, it likely exceeds the opportunity cost of producing clocks for one of the countries, making it unfavorable for that country.

Table 9-11 Production and