The US would be interested in engaging in trade at those prices it would only have to export 1 bushel of wheat to import 1 yard of cloth. England s domestic opportunity cost of producing wheat is 2 yards of cloth. If England only had to export 1 yard of cloth to import 1 bushel of wheat, it would be better off. As long as opportunity costs differ the terms of trade will fall in between the two opportunity costs and there will be gains from trade. In practice terms of trade depend on bargaining strengths of the countries.
Protectionism can maximize a country s national income a.
To alter the terms of trade b. In response to unfair actions by other countries c. To protect infant industries d. Methods of Protection a. Tariffs affect domestic and foreign producers, and domestic consumers.