Suppose that Greece and Sweden both produce rye and shoes. Greece's opportunity cost of producing a pair of shoes is 4 bushels of rye vihile Sweden's opportunity cost of producing a pair of shoes is 10 bushels of rye. By comparing the opportunity cost of producing shoes in the two countries, you can tell that ▼ has a comparative advantage in the production of shoes and v has a comparative advantage in the production of rye. Suppose that Greece and Sweden consider trading shoes and rye with each other. Greece can gain from specialization and trade as long as it receives more than v of rye for each pair of shoes it exports to Sweden. Similarly, Sweden can gain from trade as long as it receives more than v of shoes 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 shoes in terms of rye) would allow both Sweden and Greece to gain from trade? Check all that apply. O 1 bushel of rye per pair of shoes O 6 bushels of rye per pair of shoes O 3 bushels of rye per pair of shoes O 9 bushels of rye per pair of shoes
Suppose that Greece and Sweden both produce rye and shoes. Greece's opportunity cost of producing a pair of shoes is 4 bushels of rye vihile Sweden's opportunity cost of producing a pair of shoes is 10 bushels of rye. By comparing the opportunity cost of producing shoes in the two countries, you can tell that ▼ has a comparative advantage in the production of shoes and v has a comparative advantage in the production of rye. Suppose that Greece and Sweden consider trading shoes and rye with each other. Greece can gain from specialization and trade as long as it receives more than v of rye for each pair of shoes it exports to Sweden. Similarly, Sweden can gain from trade as long as it receives more than v of shoes 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 shoes in terms of rye) would allow both Sweden and Greece to gain from trade? Check all that apply. O 1 bushel of rye per pair of shoes O 6 bushels of rye per pair of shoes O 3 bushels of rye per pair of shoes O 9 bushels of rye per pair of shoes
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The first two drop bar options are ( Greece or Sweden) the third drop bar options are (1 bushel, 1/10 bushel, 1/4 bushel, 4 bushels, 10 bushels) the final drop bar options are (1 pair, 1/10 pair, 1/4 pair, 4 pairs, 10 pairs)
Transcribed Image Text:5. The price of trade
Suppose that Greece and Sweden both produce rye and shoes. Greece's opportunity cost of producing a pair of shoes is 4 bushels of rye vwhile
Sweden's opportunity cost of producing a pair of shoes is 10 bushels of rye.
By comparing the opportunity cost of producing shoes in the two countries, you can tell that
▼ has a comparative advantage in the
production of shoes and
▼ has a comparative advantage in the production of rye.
Suppose that Greece and Sweden consider trading shoes and rye with each other. Greece can gain from specialization and trade as long as it receives
more than
v of rye for each pair of shoes it exports to Sweden. Similarly, Sweden can gain from trade as long as it receives more
than
v of shoes for each bushel of rye it exports to Greece.
Based on your answer to the last question, which of the folloving prices of trade (that is, price of shoes in terms of rye) would allow both Sweden and
Greece to gain from trade? Check all that apply.
O 1 bushel of rye per pair of shoes
O 6 bushels of rye per pair of shoes
O 3 bushels of rye per pair of shoes
O 9 bushels of rye per pair of shoes
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