based on the following information. A worker in the U.S. can produce either 5 machines per day or 15 yards of cloth. A worker in India can produce either 1 machine per day or 5 yards of cloth.
-Trade between India and the U.S. would definitely occur where the price of machines in terms of cloth (terms of trade) is:
A) 1M = 2C.
B) 1M = 4C.
C) 1M = 6C.
D) 1M = 7C.
E) 1M = 8C

Question

Quizplus · Accepted Answer

The opportunity cost of producing one machine in the U.S. is 15 yards of cloth (since producing 5 machines costs the same as producing 75 yards of cloth, so 1 machine = 15 cloth). In India, the opportunity cost of producing one machine is 5 yards of cloth. Trade is beneficial when it occurs at a rate between these two opportunity costs. The option 1M = 4C falls between the U.S.'s opportunity cost (1M = 15C) and India's opportunity cost (1M = 5C), making it a beneficial rate for both countries.

Based on the Following Information