Nation Alpha Has a Comparative Advantage in Product X, and Nation

question 331

Multiple Choice

Nation Alpha has a comparative advantage in product X, and nation Beta has a comparative advantage in product Y. Trade in the two products will only benefit the two nations if

• A)the exchange ratio of X for Y is fixed.
• B)the terms of trade increase in both nations.
• C)there is excess capacity in both economies.
• D)the exchange ratio for X and Y reflect their domestic opportunity costs.