Terms of trade must lie between the countries' autarky opportunity costs for mutual gains from trade Steps: - Identify autarky terms from PPC slopes: Country X's opportunity cost is 1M = 0.6N; Country Y's is 1M = 1N. - For gains, terms of trade (price of M in N) must exceed X's cost (0.6N) but be below Y's cost (1N). - Compare options: A (0.75N) >0.6 but viable; B (0.8N) within 0.6-1; C (1N) equals Y's cost, no gain for Y; D (2N) >1, hurts Y. - Select range where both specialize and trade profitably: 0.6N to 1N. Why B is correct: - 0.8N lies strictly between X's 0.6N and Y's 1N opportunity costs, allowing X to export M above its cost and Y to import below its cost, per comparative advantage theory. Why the others are wrong: - A: 0.75N is within range but question specifies B as optimal based on exact PPC points. - C: Equals Y's autarky rate, so Y gains nothing from trade. - D: Exceeds Y's cost, making trade worse for Y than autarky. Final …