Question

Assume that by devoting all its resources to the production of X, nation Alpha can produce 40 units of X. By devoting all its resources to Y, Alpha can produce 60Y. Comparable figures for nation Beta are 60X and 40Y. The terms of trade will be at or within the 1X = 1½Y to 1X = ⅔Y range.
a.Alpha should specialize in X and Beta in Y.
b.there is no basis for mutually beneficial specialization and trade.
c.Alpha should specialize in Y and Beta in X
d.the terms of trade will be 3X equals 1Y.

Answer 1

Answer:

c.Alpha should specialize in Y and Beta in X

Explanation:

Base on the scenario been described in the question, comparing the two produce after production 40X alpha Nation and 60Y of beta nation, for this reason alpha should specialize on Y and then beta nation should specialize on X. This will lead to more production of the produce.