Suppose that Portugal and Germany both produce beer and wine. Portugal's opportunity cost of producing a bottle of wine is 3 barrels of beer while Germany's opportunity cost of producing a bottle of wine is 11 barrels of beer. By comparing the opportunity cost of producing wine in the two countries, you can tell that Portugal v has a comparative advantage in the production of wine and Germany v has a comparative advantage in the production of beer. Suppose that Portugal and Germany consider trading wine and beer with each other. Portugal can gain from specialization and trade as long as it receives more than 3 barrels v of beer for each bottle of wine it exports to Germany. Similarly, Germany can gain from trade as long as it receives more than 1/11 bottle v of wine for each barrel of beer it exports to Portugal. Based on your answer to the last question, which of the following prices of trade (that is, price of wine in terms of beer) would allow both Germany and Portugal to gain from trade? Check all that apply. O 6 barrels of beer per bottle of wine O 1 barrel of beer per bottle of wine O 2 barrels of beer per bottle of wine O 4 barrels of beer per bottle of wine

Suppose that Portugal and Germany both produce beer and wine. Portugal's opportunity cost of producing a bottle of wine is 3 barrels of beer while Germany's opportunity cost of producing a bottle of wine is 11 barrels of beer. By comparing the opportunity cost of producing wine in the two countries, you can tell that Portugal v has a comparative advantage in the production of wine and Germany v has a comparative advantage in the production of beer. Suppose that Portugal and Germany consider trading wine and beer with each other. Portugal can gain from specialization and trade as long as it receives more than 3 barrels v of beer for each bottle of wine it exports to Germany. Similarly, Germany can gain from trade as long as it receives more than 1/11 bottle v of wine for each barrel of beer it exports to Portugal. Based on your answer to the last question, which of the following prices of trade (that is, price of wine in terms of beer) would allow both Germany and Portugal to gain from trade? Check all that apply. O 6 barrels of beer per bottle of wine O 1 barrel of beer per bottle of wine O 2 barrels of beer per bottle of wine O 4 barrels of beer per bottle of wine

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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