What determines a country's limits to acceptable terms of trade?
A) Their opportunity costs in production.
B) Whether they possess the absolute advantage in the production of a good.
C) How much a country likes a good for which they are trading.
D) When a country has a comparative advantage in production of both goods.

Question

Quizplus · Accepted Answer

A country's limits to acceptable terms of trade are determined by their opportunity costs in production. In other words, countries will only specialize in and trade goods in which they have a comparative advantage, meaning that they can produce the good at a lower opportunity cost than other countries. This determines the range of acceptable terms of trade for a country.

What Determines a Country's Limits to Acceptable Terms of Trade