Multiple Choice
When there is no trade between Econia and Macroland, the price of a hairbrush is $6 in Econia and $8 in Macroland, while the price of a pair of socks is $5 in Econia and $4 in Macroland. If trade opened up between the two countries, which of these would be the terms of trade that might result, assuming that there are no transportation costs?
A) The price of a hairbrush would be $6, and the price of socks would be $5 in both countries.
B) The price of a hairbrush would be $7, and the price of socks would be $4.50 in both countries.
C) The price of a hairbrush would be $8, and the price of socks would be $4 in both countries.
D) The price of a hairbrush would be $8, and the price of socks would be $5 in both countries.
Correct Answer:
Verified
Correct Answer:
Verified
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