Suppose nation A can produce 80 units of X by using all its resources to produce X
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Suppose nation A can produce 80 units of X by using all its resources to produce X or 60 units of Y by devoting all its resources to Y. Comparable figures for nation B are 60 units of X and 60 units of Y. Assuming constant costs, in which product should each nation specialize? Why? What are the limits of the terms of trade?
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