Consider the data in the following table.

-Referring to the table above, mutually beneficial trade will occur between the two countries so long as a computer trades for:
A) 1 bushel of wheat.
B) 2 bushels of wheat.
C) 4 bushels of wheat.
D) 5 bushels of wheat.
E) 6 bushels of wheat.

Question

Consider the data in the following table.
 
-Referring to the table above, mutually beneficial trade will occur between the two countries so long as a computer trades for:
A) 1 bushel of wheat. 
B) 2 bushels of wheat. 
C) 4 bushels of wheat. 
D) 5 bushels of wheat. 
E) 6 bushels of wheat.

Quizplus · Accepted Answer

Mutually beneficial trade occurs when the exchange rate (in this case, computers for wheat) falls between the opportunity costs of the two countries involved. Without the specific table data, the general principle is that for trade to be mutually beneficial, Country A must trade computers for wheat at a rate that is better than its domestic opportunity cost, and Country B must receive computers at a rate that is better than its domestic opportunity cost. If the opportunity cost of producing a computer in terms of wheat is less than 4 bushels in one country and more than 4 bushels in the other, then trading a computer for 4 bushels of wheat would be mutually beneficial.

Consider the Data in the Following Table