Suppose that Greece and Germany both produce jeans and stained glass. Greece's opportunity cost of producing a pane of stained glass is 3 pairs of jeans while Germany's opportunity cost of producing a pane of stained glass is 11 pairs of jeans. By comparing the opportunity cost of producing stained glass in the two countries, you can tell that has a comparative advantage in the production of stained glass and has a comparative advantage in the production of jeans. Suppose that Greece and Germany consider trading stained glass and jeans with each other. Greece can gain from specialization and trade as long as it receives more than of jeans for each pane of stained glass it exports to Germany. Similarly, Germany can gain from trade as long as it receives more than of stained glass for each pair of jeans it exports to Greece. Based on your answer to the last question, which of the following prices of trade (that is, price of stained glass in terms of jeans) would allow both Germany and Greece to gain from trade? Check all that apply. O 18 pairs of jeans per pane of stained glass O 5 pairs of jeans per pane of stained glass O 1 pair of jeans per pane of stained glass
Suppose that Greece and Germany both produce jeans and stained glass. Greece's opportunity cost of producing a pane of stained glass is 3 pairs of jeans while Germany's opportunity cost of producing a pane of stained glass is 11 pairs of jeans. By comparing the opportunity cost of producing stained glass in the two countries, you can tell that has a comparative advantage in the production of stained glass and has a comparative advantage in the production of jeans. Suppose that Greece and Germany consider trading stained glass and jeans with each other. Greece can gain from specialization and trade as long as it receives more than of jeans for each pane of stained glass it exports to Germany. Similarly, Germany can gain from trade as long as it receives more than of stained glass for each pair of jeans it exports to Greece. Based on your answer to the last question, which of the following prices of trade (that is, price of stained glass in terms of jeans) would allow both Germany and Greece to gain from trade? Check all that apply. O 18 pairs of jeans per pane of stained glass O 5 pairs of jeans per pane of stained glass O 1 pair of jeans per pane of stained glass
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
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Transcribed Image Text:Suppose that Greece and Germany both produce jeans and stained glass. Greece's opportunity cost of producing a pane of stained glass is 3 pairs of
jeans while Germany's opportunity cost of producing a pane of stained glass is 11 pairs of jeans.
By comparing the opportunity cost of producing stained glass in the two countries, you can tell that
has a comparative advantage in
the production of stained glass and
has a comparative advantage in the production of jeans.
Suppose that Greece and Germany consider trading stained glass and jeans with each other. Greece can gain from specialization and trade as long as
it receives more than
of jeans for each pane of stained glass it exports to Germany. Similarly, Germany can gain from trade as long as
it receives more than
of stained glass for each pair of jeans it exports to Greece.
Based on your answer to the last question, which of the following prices of trade (that is, price of stained glass in terms of jeans) would allow both
Germany and Greece to gain from trade? Check all that apply.
18 pairs of jeans per pane of stained glass
O 5 pairs of jeans per pane of stained glass
1 pair of jeans per pane of stained glass
U 7 pairs of jeans per pane of stained glass
Expert Solution
Step 1
Opportunity cost is what we get in return of an action. To elaborate, opportunity cost is the misfortune or the advantage that might have been appreciated if the elective decision was chosen.
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