Suppose that Portugal and Sweden both produce fish and olives. Portugal's opportunity cost of producing a crate of olives is 3 pounds of fish while Sweden's opportunity cost of producing a crate of olives is 11 pounds of fish. By comparing the opportunity cost of producing olives in the two countries, you can tell that has a comparative advantage in the production of olives and v has a comparative advantage in the production of fish. Suppose that Portugal and Sweden consider trading olives and fish with each other. Portugal can gain from specialization and trade as long as it receives more than of fish for each crate of olives it exports to Sweden. Similarly, Sweden can gain from trade as long as it receives more than v of olives for each pound of fish it exports to Portugal.

Suppose that Portugal and Sweden both produce fish and olives. Portugal's opportunity cost of producing a crate of olives is 3 pounds of fish while Sweden's opportunity cost of producing a crate of olives is 11 pounds of fish. By comparing the opportunity cost of producing olives in the two countries, you can tell that has a comparative advantage in the production of olives and v has a comparative advantage in the production of fish. Suppose that Portugal and Sweden consider trading olives and fish with each other. Portugal can gain from specialization and trade as long as it receives more than of fish for each crate of olives it exports to Sweden. Similarly, Sweden can gain from trade as long as it receives more than v of olives for each pound of fish it exports to Portugal.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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