The graphs show the production possibilities for commodities X and Y in two countries M and N.
What will be the effect of an agreement between M and N to exchange the commodities at a rate of 1Y for 3X?
Both countries will gain, because their consumption possibilities will increase.
2 )
Consumers in country M will lose, because a unit of Y will now cost 3X instead of 2X.
3 )
Only country N will gain, because N can produce more of both commodities than M.
4 )
Neither country will gain, because they both have a comparative advantage in the production of the same commodity, X.
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