If the international terms of trade settle at a level that is between each
Country's opportunity cost:
A)there is no basis for gainful trade for either country.
B)both countries gain from trade.
C)only one country gains from trade.
D)one country gains and the other country loses from trade.

Question

Quizplus · Accepted Answer

When the international terms of trade settle at a level that is between each country's opportunity cost, both countries will have a comparative advantage in producing and exporting different goods. They can then gain from trade by specializing in the production of a good with a lower opportunity cost and importing the other good. This will lead to increased efficiency and higher welfare for both countries.

If the International Terms of Trade Settle at a Level