Country A takes 20 hrs to produce one unit of good X and 5 hrs for good Y. Country B takes 30 hrs to produce one unit of good X and 15 hrs for good Y. Qus. State whether international trade will take place between the two countries if the terms of trade were one unit of good Y for one unit of good X. Can anyone please explain how we solve this? The qus consists of only one mark.
This is a question about comparative advantage, which is covered in chapter 24 of the textbook. You need to work out which country will produce good X and which will produce good Y according to the theory of comparative advantage, and then the range of prices whereby trade will occur. This is a standard question with no pitfalls, so this should be enough information to get you started.