-Refer to the above table. Assuming constant opportunity costs
A)neither country will be willing to engage in trade at any rate of exchange of product A for product B.
B)both countries will be willing to engage in trade at a rate of exchange of 0.3 unit of product A for 1 unit of product B.
C)both countries will be willing to engage in trade at a rate of exchange of 3 units of product A for 1 unit of product B.
D)both countries will be willing to engage in trade at a rate of exchange of 1.5 unit of product A for 1 unit of product B.

Question

-Refer to the above table. Assuming constant opportunity costs
A)neither country will be willing to engage in trade at any rate of exchange of product A for product B. 
B)both countries will be willing to engage in trade at a rate of exchange of 0.3 unit of product A for 1 unit of product B. 
C)both countries will be willing to engage in trade at a rate of exchange of 3 units of product A for 1 unit of product B. 
D)both countries will be willing to engage in trade at a rate of exchange of 1.5 unit of product A for 1 unit of product B.

Quizplus · Accepted Answer

Both countries will be willing to trade if the exchange rate is between their opportunity costs. If the opportunity cost of product A in terms of product B is less than 1.5 for one country and more than 1.5 for the other, both will benefit from trade.

-Refer to the Above Table