Nation Alpha has a comparative advantage in product X and nation Beta has a comparative advantage in product Y. Trade in the two products will only benefit the two nations if:

A. The exchange ratio of X for Y is fixed
B. The terms of trade increase in both nations
C. There is excess capacity in both economies
D. The prices charged for X and Y reflect their domestic opportunity costs

ANSWER:

D. The prices charged for X and Y reflect their domestic opportunity costs