Question

Mutually beneficial trade will occur whenever the exchange rate between the goods involved is set at a level where A. each country can export a good at a price above the opportunity cost of producing the good in the domestic market. B. each country can import a good at a price above the opportunity cost of producing the good in the domestic market. C. the exchange ratio is exactly equal to the opportunity cost of producing the good in each country. D. each country will specialize in the production of those goods in which it has an absolute advantage.

Answer 1

Answer: A. each country can export a good at a price above the opportunity cost of producing the good in the domestic market.

Explanation: When countries can export goods at price above the opportunity cost of producing the good in the domestic market, it is said to be mutually beneficial trade when it occur whenever the exchange rate between the goods involved is set at a level.

Mutually beneficial trade will occur when two nations agrees on a acceptable exchange rate of one product to another.