Refer to the tables below. Which of the following would be feasible terms for trade between Latalia and Trombonia? Production possibilities tables for two countries, Latalia and Trombonia:
Latalia's production possibilities: Trombonia's production possibilities:

Question

Refer to the tables below. Which of the following would be feasible terms for trade between Latalia and Trombonia? Production possibilities tables for two countries, Latalia and Trombonia:
Latalia's production possibilities:  Trombonia's production possibilities:

Quizplus · Accepted Answer

Since Latalia has a comparative advantage in producing beans (1 ton of beans per 2 tons of pork) and Trombonia has a comparative advantage in producing pork (1 ton of pork per 2 tons of beans), the terms of trade should be somewhere in between their opportunity costs. The lowest opportunity cost for Latalia to produce 1 ton of pork is 4 tons of beans (option D), while the lowest opportunity cost for Trombonia to produce 1 ton of beans is also 4 tons of pork. Therefore, the feasible terms for trade would be 4 tons of beans for 1 ton of pork.

Refer to the Tables Below