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Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. If the terms of trade are established as 1 apple for 2 oranges: A. there are no incentives for Alpha to specialize and trade with Beta. B. it is in the interest of both countries to specialize and trade with one another. C. it is in the interest of Beta to grow oranges and trade for apples. D. there are no incentives for Beta to engage in international specialization and trade of apples and oranges.

Answer :

Answer: Option (a) is correct.

Explanation:

Alpha:

Opportunity cost of producing one apple = [tex]\frac{18}{9}[/tex]

                                                                     = 2 oranges

Beta:

Opportunity cost of producing one apple = [tex]\frac{16}{4}[/tex]

                                                                     = 4 oranges

It was given that the terms of trade are established as 1 apple for 2 oranges.

Therefore, there are no incentives for Alpha to trade until the terms of trade becomes greater than 2 oranges for one apple.

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