Questions: Suppose that after specializing and trading, Bob ends up with 5 bananas and 10 fish while Ann ends up with 5 bananas and 20 fish. Which of the following is true about the terms of trade? One banana must have traded for two fish. One banana must have traded for one fish. One fish must have traded for one banana. One fish must have traded for two bananas.

The answer is the first one: One banana must have traded for two fish.

Explanation for each option:

1. One banana must have traded for two fish.

   • This option is correct. After trading, Bob has 5 bananas and 10 fish, and Ann has 5 bananas and 20 fish. If we assume they started with equal amounts of bananas and fish, the trade must have involved exchanging bananas for fish. Since Ann has 10 more fish than Bob, and they both have the same number of bananas, it implies that Ann traded bananas for fish at a rate of one banana for two fish.

2. One banana must have traded for one fish.

   • This option is incorrect. If one banana traded for one fish, the difference in the number of fish between Ann and Bob would not be 10, given they both have the same number of bananas.

3. One fish must have traded for one banana.

   • This option is incorrect. If one fish traded for one banana, the number of bananas and fish would not align with the final distribution where Ann has 10 more fish than Bob.

4. One fish must have traded for two bananas.

   • This option is incorrect. If one fish traded for two bananas, Ann would have fewer bananas than Bob, which contradicts the final distribution where both have the same number of bananas.

In summary, the terms of trade must have been one banana for two fish to result in the final distribution of goods between Bob and Ann.