If Japan has a comparative advantage over the United States in the production of new cars and can sell a new car for an average price of $22,000,while the United States has an average price of a new car at $25,000,then if the two countries engage in trade,the terms of trade will:

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The terms of trade will lie somewhere between $22,000 and $25,000 because both countries will want to benefit from trade. For Japan, it may not make sense to sell a car for less than $22,000 and for the United States, it may not make sense to buy a car for more than $25,000. Therefore, the terms of trade will fall somewhere in between those two prices, allowing both countries to benefit from trade.

If Japan Has a Comparative Advantage Over the United States