-Refer to Exhibit 34-6.Which of the following terms of trade would both countries agree on?
A) 1 unit of wine = 2.5 units of cheese
B) 1 unit of wine = 1.5 units of cheese
C) 2.5 units of wine = 1 unit of cheese
D) 1.5 units of wine = 1 unit of cheese
E) none of the above

Question

-Refer to Exhibit 34-6.Which of the following terms of trade would both countries agree on?
A) 1 unit of wine = 2.5 units of cheese 
B) 1 unit of wine = 1.5 units of cheese 
C) 2.5 units of wine = 1 unit of cheese 
D) 1.5 units of wine = 1 unit of cheese 
E) none of the above

Quizplus · Accepted Answer

Both countries would agree on a terms of trade that falls between their opportunity costs. If the opportunity cost of wine in terms of cheese is between 1.5 and 2.5, then 1 unit of wine = 1.5 units of cheese is a mutually beneficial trade.