Suppose that Poland and Luxembourg both produce olive oil and glass. Poland's opportunity cost of producing a pane of glass is 6 crates of olive oil while Luxembourg's opportunity cost of producing a pane of glass is 11 crates of olive oil. By comparing the opportunity cost of producing glass in the two countries, you can tell that production of glass and has a comparative advantage in the production of olive oil. has a comparative advantage in the Suppose that Poland and Luxembourg consider trading glass and olive oil with each other. Poland can gain from specialization and trade as long as it receives more than of olive oil for each pane of glass it exports to Luxembourg. Similarly, Luxembourg can gain from trade as long as of glass for each crate of olive oil it exports to Poland. it receives more than Based on your answer to the last question, which of the following prices of trade (that is, price of glass in terms of olive oil) would allow both Luxembourg and Poland to gain from trade? Check all that apply. 3 crates of olive oil per pane of glass 14 crates of olive oil per pane of glass 1 crate of olive oil per pane of glass

Suppose that Poland and Luxembourg both produce olive oil and glass. Poland's opportunity cost of producing a pane of glass is 6 crates of olive oil while Luxembourg's opportunity cost of producing a pane of glass is 11 crates of olive oil. By comparing the opportunity cost of producing glass in the two countries, you can tell that production of glass and has a comparative advantage in the production of olive oil. has a comparative advantage in the Suppose that Poland and Luxembourg consider trading glass and olive oil with each other. Poland can gain from specialization and trade as long as it receives more than of olive oil for each pane of glass it exports to Luxembourg. Similarly, Luxembourg can gain from trade as long as of glass for each crate of olive oil it exports to Poland. it receives more than Based on your answer to the last question, which of the following prices of trade (that is, price of glass in terms of olive oil) would allow both Luxembourg and Poland to gain from trade? Check all that apply. 3 crates of olive oil per pane of glass 14 crates of olive oil per pane of glass 1 crate of olive oil per pane of glass

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider two neighboring island countries called Bellissima and Dolorium. They each have 4 million labor hours available per week that they can use to produce rye, jeans, or a combination of both. The following table shows the amount of rye or jeans that can be produced using 1 hour of labor. Rye Jeans Country (Bushels per hour of labor) (Pairs per hour of labor) Bellissima 12 24 Dolorium 8 32 Initially, suppose Bellissima uses 1 million hours of labor per week to produce rye and 3 million hours per week to produce jeans, while Dolorium uses 3 million hours of labor per week to produce rye and 1 million hours per week to produce jeans. Consequently, Bellissima produces 12 million bushels of rye and 72 million pairs of jeans, and Dolorium produces 24 million bushels of rye and 32 million pairs of jeans. Assume there are no other countries willing to trade goods, so, in the absence trade between these two countries, each country consumes the amount of rye and jeans it produces. v of…
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The following hypothetical production possibilities tables are for China and the United States. Assume that before specialization and trade, the optimal product mix for China is alternative B and for the United States is alternative U. a. Are comparative-cost conditions such that the two areas should specialize? If so, what product should each produce? b. What is the total gain in apparel and chemical output that would result from such specialization? c. What are the limits of the terms of trade? Suppose that the actual terms of trade are 1 unit of apparel for 1 unit of chemicals and that 4 units of apparel are exchanged for 6 units of chemicals. What are the gains from specialization and trade for each nation?
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has an absolute advantage in the production of barley, and has an absolute advantage in the production of alfalfa. bushels of barley, whereas Megan's opportunity cost of producing 1 bushel of opportunity cost of producing alfalfa than Megan, has a has a comparative advantage in the production of barley. Larry's opportunity cost of producing 1 bushel of alfalfa is alfalfa is bushels of barley. Because Larry has a comparative advantage in the production of alfalfa, and