Suppose that Ireland and Norway both produce boots and shoes. Ireland's opportunity cost of producing a pair of shoes is 4 pairs of boots while Norway's opportunity cost of producing a pair of shoes is 11 pairs of boots. 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 boots. Suppose that Ireland and Norway consider trading shoes and boots with each other. Ireland can gain from specialization and trade as long as it receives more than of boots for each pair of shoes it exports to Norway. Similarly, Norway can gain from trade as long as it receives more than of shoes for each pair of boots it exports to Ireland. Based on your answer to the last question, which of the following prices of trade (that is, price of shoes in terms of boots) would allow both Norway and Ireland to gain from trade? Check all that apply. 8 pairs of boots per pair of shoes 3 pairs of boots per pair of shoes 16 pairs of boots per pair of shoes 6 pairs of boots per pair of shoes
Suppose that Ireland and Norway both produce boots and shoes. Ireland's opportunity cost of producing a pair of shoes is 4 pairs of boots while Norway's opportunity cost of producing a pair of shoes is 11 pairs of boots. 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 boots. Suppose that Ireland and Norway consider trading shoes and boots with each other. Ireland can gain from specialization and trade as long as it receives more than of boots for each pair of shoes it exports to Norway. Similarly, Norway can gain from trade as long as it receives more than of shoes for each pair of boots it exports to Ireland. Based on your answer to the last question, which of the following prices of trade (that is, price of shoes in terms of boots) would allow both Norway and Ireland to gain from trade? Check all that apply. 8 pairs of boots per pair of shoes 3 pairs of boots per pair of shoes 16 pairs of boots per pair of shoes 6 pairs of boots per pair of shoes
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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5. The price of trade
Suppose that Ireland and Norway both produce boots and shoes. Ireland's opportunity cost of producing a pair of shoes is 4 pairs of boots while Norway's opportunity cost of producing a pair of shoes is 11 pairs of boots.
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 boots.
Suppose that Ireland and Norway consider trading shoes and boots with each other. Ireland can gain from specialization and trade as long as it receives more than of boots for each pair of shoes it exports to Norway. Similarly, Norway can gain from trade as long as it receives more than of shoes for each pair of boots it exports to Ireland.
Based on your answer to the last question, which of the following prices of trade (that is, price of shoes in terms of boots) would allow both Norway and Ireland to gain from trade? Check all that apply.
8 pairs of boots per pair of shoes
3 pairs of boots per pair of shoes
16 pairs of boots per pair of shoes
6 pairs of boots per pair of shoes
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