5. The price of trade Suppose that Poland and Liechtenstein both produce ale and shoes. Poland's opportunity cost of producing a pair of shoes is 4 kegs of ale while Liechtenstein's opportunity cost of producing a pair of shoes is 12 kegs of ale. By comparing the opportunity cost of producing shoes in the two countries, you can tell that production of shoes and has a comparative advantage in the production of ale. has a comparative advantage in the Suppose that Poland and Liechtenstein consider trading shoes and ale with each other. Poland can gain from specialization and trade as long as it receives more than of ale for each pair of shoes it exports to Liechtenstein. Similarly, Liechtenstein can gain from trade as long as it of shoes for each keg of ale it exports to Poland. receives more than Based on your answer to the last question, which of the following prices of trade (that is, price of shoes in terms of ale) would allow both Liechtenstein and Poland to gain from trade? Check all that apply. 7 kegs of ale per pair of shoes 5 kegs of ale per pair of shoes 16 kegs of ale per pair of shoes 2 kegs of ale per pair of shoes
5. The price of trade Suppose that Poland and Liechtenstein both produce ale and shoes. Poland's opportunity cost of producing a pair of shoes is 4 kegs of ale while Liechtenstein's opportunity cost of producing a pair of shoes is 12 kegs of ale. By comparing the opportunity cost of producing shoes in the two countries, you can tell that production of shoes and has a comparative advantage in the production of ale. has a comparative advantage in the Suppose that Poland and Liechtenstein consider trading shoes and ale with each other. Poland can gain from specialization and trade as long as it receives more than of ale for each pair of shoes it exports to Liechtenstein. Similarly, Liechtenstein can gain from trade as long as it of shoes for each keg of ale it exports to Poland. receives more than Based on your answer to the last question, which of the following prices of trade (that is, price of shoes in terms of ale) would allow both Liechtenstein and Poland to gain from trade? Check all that apply. 7 kegs of ale per pair of shoes 5 kegs of ale per pair of shoes 16 kegs of ale per pair of shoes 2 kegs of ale per pair of shoes
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![5. The price of trade
Suppose that Poland and Liechtenstein both produce ale and shoes. Poland's opportunity cost of producing a pair of shoes is 4 kegs of ale while
Liechtenstein's opportunity cost of producing a pair of shoes is 12 kegs of ale.
By comparing the opportunity cost of producing shoes in the two countries, you can tell that
production of shoes and
has a comparative advantage in the production of ale.
has a comparative advantage in the
Suppose that Poland and Liechtenstein consider trading shoes and ale with each other. Poland can gain from specialization and trade as long as it
receives more than
of ale for each pair of shoes it exports to Liechtenstein. Similarly, Liechtenstein can gain from trade as long as it
of shoes for each keg of ale it exports to Poland.
receives more than
Based on your answer to the last question, which of the following prices of trade (that is, price of shoes in terms of ale) would allow both Liechtenstein
and Poland to gain from trade? Check all that apply.
7 kegs of ale per pair of shoes
5 kegs of ale per pair of shoes
16 kegs of ale per pair of shoes
2 kegs of ale per pair of shoes](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffd24358e-5277-4b14-8b88-e8d23ef8e39d%2F58bf05f0-3212-4485-88f6-e93ebfeec694%2Fnmbqbm8_processed.png&w=3840&q=75)
Transcribed Image Text:5. The price of trade
Suppose that Poland and Liechtenstein both produce ale and shoes. Poland's opportunity cost of producing a pair of shoes is 4 kegs of ale while
Liechtenstein's opportunity cost of producing a pair of shoes is 12 kegs of ale.
By comparing the opportunity cost of producing shoes in the two countries, you can tell that
production of shoes and
has a comparative advantage in the production of ale.
has a comparative advantage in the
Suppose that Poland and Liechtenstein consider trading shoes and ale with each other. Poland can gain from specialization and trade as long as it
receives more than
of ale for each pair of shoes it exports to Liechtenstein. Similarly, Liechtenstein can gain from trade as long as it
of shoes for each keg of ale it exports to Poland.
receives more than
Based on your answer to the last question, which of the following prices of trade (that is, price of shoes in terms of ale) would allow both Liechtenstein
and Poland to gain from trade? Check all that apply.
7 kegs of ale per pair of shoes
5 kegs of ale per pair of shoes
16 kegs of ale per pair of shoes
2 kegs of ale per pair of shoes
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