Answer
Exchanged
Work Step by Step
Terms of trade is the rate at which one product can be EXCHANGED for another product.
Shirtland is willing to pay 3 shirts for 1 chip. They would sacrifice 3 shirts if producing its own chip.
Chipland's opportunity cost of 1 chip is 1 shirt, and Shirtland's opportunity cost is 3 shirts for 1 chip.
Chipland has a comparative advantage in the production of chips because it sacrifices fewer shirts to produce 1 chip.
The terms of trade will be exchanging two shirts per chip.
