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

If the international terms of trade settle at a level between the opportunity cost of each country, then both countries can benefit from trade. Each country can specialize in producing the good that they have a comparative advantage in and trade with the other country for the good that they do not have a comparative advantage in. This will result in an increase in overall production and consumption, which benefits both countries.

If the International Terms of Trade Settle at a Level