Suppose that Poland and Liechtenstein both produce ale and shoes. Poland's opportunity cost of producing a pair of shoes is 5 kegs of ale while Liechtenstein's opportunity cost of producing a pair of shoes is 12 kegs of ale. By comparing the opportunity cost of producing shoes in the two countries, you can tell that production of shoes and has a comparative advantage in the production of ale. has a comparative advantage in the Suppose that Poland and Liechtenstein consider trading shoes and ale with each other. Poland can gain from specialization and trade as long as it receives more than of ale for each pair of shoes it exports to Liechtenstein. Similarly, Liechtenstein can gain from trade as long as it of shoes for each keg of ale it exports to Poland. receives more than Based on your answer to the last question, which of the following prices of trade (that is, price of shoes in terms of ale) would allow both Liechtenstein and Poland to gain from trade? Check all that apply. 8 kegs of ale per pair of shoes 10 kegs of ale per pair of shoes O 1 keg of ale per pair of shoes
Suppose that Poland and Liechtenstein both produce ale and shoes. Poland's opportunity cost of producing a pair of shoes is 5 kegs of ale while Liechtenstein's opportunity cost of producing a pair of shoes is 12 kegs of ale. By comparing the opportunity cost of producing shoes in the two countries, you can tell that production of shoes and has a comparative advantage in the production of ale. has a comparative advantage in the Suppose that Poland and Liechtenstein consider trading shoes and ale with each other. Poland can gain from specialization and trade as long as it receives more than of ale for each pair of shoes it exports to Liechtenstein. Similarly, Liechtenstein can gain from trade as long as it of shoes for each keg of ale it exports to Poland. receives more than Based on your answer to the last question, which of the following prices of trade (that is, price of shoes in terms of ale) would allow both Liechtenstein and Poland to gain from trade? Check all that apply. 8 kegs of ale per pair of shoes 10 kegs of ale per pair of shoes O 1 keg of ale per pair of shoes
Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter3: Interdependence And The Gains From Trade
Section: Chapter Questions
Problem 5PA
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