Suppose that Ireland and Liechtenstein both produce olive oil and wheat. Ireland's opportunity cost of producing a bushel of wheat is 5 crates of olive oil while Liechtenstein's opportunity cost of producing a bushel of wheat is 11 crates of olive oil. By comparing the opportunity cost of producing wheat in the two countries, you can tell that production of wheat and has a comparative advantage in the has a comparative advantage in the production of olive oil. Suppose that Ireland and Liechtenstein consider trading wheat and olive oil with each other. Ireland can gain from specialization and trade as long as it receives more than of olive oil for each bushel of wheat it exports to Liechtenstein. Similarly, Liechtenstein can gain from trade as of wheat for each crate of olive oil it exports to Ireland. long as it receives more than Based on your answer to the last question, which of the following prices of trade (that is, price of wheat in terms of olive oil) would allow both Liechtenstein and Ireland to gain from trade? Check all that apply. 1 crate of olive oil per bushel of wheat 2 crates of olive oil per bushel of wheat 7 crates of olive oil per bushel of wheat 15 crates of olive oil per bushel of wheat
Suppose that Ireland and Liechtenstein both produce olive oil and wheat. Ireland's opportunity cost of producing a bushel of wheat is 5 crates of olive oil while Liechtenstein's opportunity cost of producing a bushel of wheat is 11 crates of olive oil. By comparing the opportunity cost of producing wheat in the two countries, you can tell that production of wheat and has a comparative advantage in the has a comparative advantage in the production of olive oil. Suppose that Ireland and Liechtenstein consider trading wheat and olive oil with each other. Ireland can gain from specialization and trade as long as it receives more than of olive oil for each bushel of wheat it exports to Liechtenstein. Similarly, Liechtenstein can gain from trade as of wheat for each crate of olive oil it exports to Ireland. long as it receives more than Based on your answer to the last question, which of the following prices of trade (that is, price of wheat in terms of olive oil) would allow both Liechtenstein and Ireland to gain from trade? Check all that apply. 1 crate of olive oil per bushel of wheat 2 crates of olive oil per bushel of wheat 7 crates of olive oil per bushel of wheat 15 crates of olive oil per bushel of wheat
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
None
Transcribed Image Text:Suppose that Ireland and Liechtenstein both produce olive oil and wheat. Ireland's opportunity cost of producing a bushel of wheat is 5 crates of olive
oil while Liechtenstein's opportunity cost of producing a bushel of wheat is 11 crates of olive oil.
By comparing the opportunity cost of producing wheat in the two countries, you can tell that
production of wheat and
has a comparative advantage in the
has a comparative advantage in the production of olive oil.
Suppose that Ireland and Liechtenstein consider trading wheat and olive oil with each other. Ireland can gain from specialization and trade as long as
it receives more than
of olive oil for each bushel of wheat it exports to Liechtenstein. Similarly, Liechtenstein can gain from trade as
of wheat for each crate of olive oil it exports to Ireland.
long as it receives more than
Based on your answer to the last question, which of the following prices of trade (that is, price of wheat in terms of olive oil) would allow both
Liechtenstein and Ireland to gain from trade? Check all that apply.
1 crate of olive oil per bushel of wheat
2 crates of olive oil per bushel of wheat
7 crates of olive oil per bushel of wheat
15 crates of olive oil per bushel of wheat
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education