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Comparative Advantage and Terms of Trade: Oil and Wheat

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North Dakota and South Dakota produce wheat and oil. In a year, North Dakota can produce either 30 million barrels of oil, 20 million tons of wheat, or some combination of the two. South Dakota can produce either 20 million barrels of oil, 40 million tons of wheat, or some combination of the two in a year.

Which of the following choices describes​ a trade that would benefit both sides?

A

South Dakota would produce oil and trade it to North Dakota at a rate of 1.5 tons of wheat per barrel of oil.

B

South Dakota would produce wheat and trade it to North Dakota at a rate of 1 ton of wheat per barrel of oil.

C

North Dakota would produce oil and trade it to South Dakota at a rate of 3 tons of wheat per barrel of oil.

D

North Dakota would produce wheat and trade it to South Dakota at a rate of 2 tons of wheat per barrel of oil.

E

South Dakota would produce wheat and trade it to North Dakota at a rate of 0.5 tons of wheat per barrel of oil.