Multiple Choice
Countries A and B currently consume 400 units of food and 400 units of textiles each and currently do not trade with one another.The citizens of country A have to give up one unit of food to gain two units of textiles,while the citizens of country B have to give up one unit of textiles to gain two units of food.Their production possibilities curves are shown. 
Suppose that trade is allowed and that the international exchange rate between food and textiles is one-for-one.The increased consumption following trade will be
A) an increase of 400 units of food and 400 units of textiles.
B) an increase of 1,200 units of food and 1,200 units of textiles.
C) an increase of 800 units of food and 800 units of textiles.
D) there are no gains from trade in this example.
Correct Answer:
Verified
Correct Answer:
Verified
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