Refer to the scenario above. Which of the following statements is true of the terms of trade of tea for coffee?

A) The terms of trade will lie somewhere below 1/3.
B) The terms of trade will lie between 1/3 and 2.
C) The terms of trade will lie somewhere above 2.
D) The terms of trade will equal zero.

ANSWER:

B) The terms of trade will lie between 1/3 and 2.