Refer to Table 20.2. Which terms of trade benefits both countries?

A) 1 tractor for 10 motorcycles
B) 1 tractor for 12.5 motorcycles
C) 1 motorcycle for 10 tractors
D) 1 motorcycle for 1/5 of a tractor

The terms of trade that benefit both countries must allow each country to trade based on their comparative advantage, meaning they can get more of what they want than if they produced it themselves. In Table 20.2, China can produce tractors and motorcycles at different rates (e.g., 5 tractors for 250 motorcycles or 10 tractors for 200 motorcycles), and Thailand has its own rates (e.g., 5 tractors for 225 motorcycles or 10 tractors for 150 motorcycles). The option of 1 tractor for 12.5 motorcycles (B) is between China's opportunity cost (between 10 and 5 motorcycles per tractor) and Thailand's opportunity cost (more than 15 motorcycles per tractor at the lower end), making it beneficial for both. China would prefer to trade tractors for more than 10 motorcycles each (its opportunity cost), and Thailand would find it advantageous to trade motorcycles for less than 15 motorcycles per tractor (its opportunity cost). Option B allows both countries to trade at a rate that is better than their domestic substitution rate.