5. The price of trade Suppose that Poland and Wales both produce olive oil and shoes. Poland's opportunity cost of producing a pair of shoes is 5 crates of olive oil while Wales's opportunity cost of producing a pair of shoes is 11 crates of olive oil. By comparing the opportunity cost of producing shoes in the two countries, you can tell that Poland has a comparative advantage in the production of shoes and Wales has a comparative advantage in the production of olive oil. Suppose that Poland and Wales consider trading shoes and olive oil with each other. Poland can gain from specialization and trade as long as it receives more than 5 crates of olive oil for each pair of shoes it exports to Wales. Similarly, Wales can gain from trade as long as it receives more than 11 pairs of shoes for each crate of olive oil it exports to Poland. Based on your answer to the last question, which of the following prices of trade (that is, price of shoes in terms of olive oil) would allow both Wales and Poland to gain from trade? Check all that apply. 2 crates of olive oil per pair of shoes 01 crate of olive oil per pair of shoes 15 crates of olive oil per pair of shoes O crates of olive oil per pair of shoes

5. The price of trade Suppose that Poland and Wales both produce olive oil and shoes. Poland's opportunity cost of producing a pair of shoes is 5 crates of olive oil while Wales's opportunity cost of producing a pair of shoes is 11 crates of olive oil. By comparing the opportunity cost of producing shoes in the two countries, you can tell that Poland has a comparative advantage in the production of shoes and Wales has a comparative advantage in the production of olive oil. Suppose that Poland and Wales consider trading shoes and olive oil with each other. Poland can gain from specialization and trade as long as it receives more than 5 crates of olive oil for each pair of shoes it exports to Wales. Similarly, Wales can gain from trade as long as it receives more than 11 pairs of shoes for each crate of olive oil it exports to Poland. Based on your answer to the last question, which of the following prices of trade (that is, price of shoes in terms of olive oil) would allow both Wales and Poland to gain from trade? Check all that apply. 2 crates of olive oil per pair of shoes 01 crate of olive oil per pair of shoes 15 crates of olive oil per pair of shoes O crates of olive oil per pair of shoes

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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