5. The price of trade Suppose that Greece and Austria both produce rye and wine. Greece's opportunity cost of producing a bottle of wine is 5 bushels of rye while Austria's opportunity cost of producing a bottle of wine is 11 bushels of rye. By comparing the opportunity cost of producing wine in the two countries, you can tell that has a comparative advantage in the production of wine and has a comparative advantage in the production of rye. Suppose that Greece and Austria consider trading wine and rye with each other. Greece can gain from specialization and trade as long as it receives more than of rye for each bottle of wine it exports to Austria. Similarly, Austria can gain from trade as long as it receives more than of wine for each bushel of rye it exports to Greece. Based on your answer to the last question, which of the following prices of trade (that is, price of wine in terms of rye) would allow both Austria and Greece to gain from trade? Check all that apply. O 2 bushels of rye per bottle of wine O 9 bushels of rye per bottle of wine O 1 bushel of rye per bottle of wine O 17 bushels of rye per bottle of wine

5. The price of trade Suppose that Greece and Austria both produce rye and wine. Greece's opportunity cost of producing a bottle of wine is 5 bushels of rye while Austria's opportunity cost of producing a bottle of wine is 11 bushels of rye. By comparing the opportunity cost of producing wine in the two countries, you can tell that has a comparative advantage in the production of wine and has a comparative advantage in the production of rye. Suppose that Greece and Austria consider trading wine and rye with each other. Greece can gain from specialization and trade as long as it receives more than of rye for each bottle of wine it exports to Austria. Similarly, Austria can gain from trade as long as it receives more than of wine for each bushel of rye it exports to Greece. Based on your answer to the last question, which of the following prices of trade (that is, price of wine in terms of rye) would allow both Austria and Greece to gain from trade? Check all that apply. O 2 bushels of rye per bottle of wine O 9 bushels of rye per bottle of wine O 1 bushel of rye per bottle of wine O 17 bushels of rye per bottle of wine

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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