If the international terms of trade lies beneath (inside) the Mexican cost ratio, Mexico is worse off with trade than without trade.

Question

Quizplus · Accepted Answer

If the terms of trade are less favorable than the Mexican cost ratio, Mexico would have to give up more of their own production to obtain the same amount of another country's production. This would lead to a net loss for Mexico in terms of their own production and welfare.

If the International Terms of Trade Lies Beneath (Inside) the Mexican