The production possibilities of two countries, Homeland and Foreign, capable of producing two goods, cloth and wheat, are given as follows: | Country | Output per labor year: Cloth | Output per labor year: Wheat | Homeland | 250 | 200 | Foreign | 300 | 400 | In the above question, Homeland and Foreign would be willing to trade with each other if the relative price of cloth is set at (A) 1·5 (B) 1 (C) 0·5 (D) None of the above, as there is no scope for trade

JNU SIS 2016 Question 36: Theories of international trade

The production possibilities of two countries, Homeland and Foreign, capable of producing two goods, cloth and wheat, are given as follows :

Country	Output per labor year: Cloth	Output per labor year: Wheat
Homeland	250	200
Foreign	300	400

In the above question, Homeland and Foreign would be willing to trade with each other if the relative price of cloth is set at

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Theories of international trade has come up 151 times in 6 exams since 2006.

This question is on Specialisation and the gains from trade, part of Theories of international trade in International Economics.

How specialisation raises consumption possibilities, including complete and incomplete specialisation.

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