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
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter33: International Trade
Section: Chapter Questions
Problem 30P: In Japan, one worker can make 5 tons of rubber or 80 radios. In Malaysia, one worker can make 10...
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