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Nation Alpha Has a Comparative Advantage in Product X, and Nation

Question 64

Multiple Choice

Nation Alpha has a comparative advantage in product X, and nation Beta has a comparative advantage in product Y. Trade in the two products will only benefit the two nations if


A) the exchange ratio of X for Y is fixed.
B) the terms of trade increase in both nations.
C) there is excess capacity in both economies.
D) the exchange ratio for X and Y reflect their domestic opportunity costs.

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