Question

For trade to be mutually beneficial, the terms of trade must fall between:

a. Opportunity cost ratios
b. Absolute advantage differences
c. Production possibilities frontiers
d. Absolute cost differences

Answer 1

Trade can be mutually beneficial when the terms of trade fall between the opportunity cost ratios.

Step-by-step explanation:

Trade can be mutually beneficial when the terms of trade fall between the opportunity cost ratios. The opportunity cost represents the value of the next best alternative that is forgone when making a choice. In trade, both parties can benefit by specializing in their comparative advantages, and the terms of trade should reflect the opportunity cost ratios of the goods being traded.