Suppose that Hungary and Slovakia both produce boots and liquor. Hungary's opportunity cost of producing a case of liquor is 4 pairs of boots while Slovakia's opportunity cost of producing a case of liquor is 12 pairs of boots. By comparing the opportunity cost of producing liquor in the two countries, you can tell that production of liquor and has a comparative advantage in the production of boots. Suppose that Hungary and Slovakia consider trading liquor and boots with each other. Hungary can gain from specialization and trade as long as it receives more than of boots for each case of liquor it exports to Slovakia. Similarly, Slovakia can gain from trade as long as it receives of liquor for each pair of boots it exports to Hungary. more than has a comparative advantage in the Based on your answer to the last question, which of the following prices of trade (that is, price of liquor in terms of boots) would allow both Slovakia and Hungary to gain from trade? Check all that apply. U11 pairs of boots per case of liquor 2 pairs of boots per case of liquor ☐ 1 pair of boots per case of liquor 8 pairs of boots per case of liquor
Suppose that Hungary and Slovakia both produce boots and liquor. Hungary's opportunity cost of producing a case of liquor is 4 pairs of boots while Slovakia's opportunity cost of producing a case of liquor is 12 pairs of boots. By comparing the opportunity cost of producing liquor in the two countries, you can tell that production of liquor and has a comparative advantage in the production of boots. Suppose that Hungary and Slovakia consider trading liquor and boots with each other. Hungary can gain from specialization and trade as long as it receives more than of boots for each case of liquor it exports to Slovakia. Similarly, Slovakia can gain from trade as long as it receives of liquor for each pair of boots it exports to Hungary. more than has a comparative advantage in the Based on your answer to the last question, which of the following prices of trade (that is, price of liquor in terms of boots) would allow both Slovakia and Hungary to gain from trade? Check all that apply. U11 pairs of boots per case of liquor 2 pairs of boots per case of liquor ☐ 1 pair of boots per case of liquor 8 pairs of boots per case of liquor
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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