Suppose that Spain and Switzerland both produce oil and shoes. Spain's opportunity cost of producing a pair of shoes is 3 barrels of oil while Switzerland's opportunity cost of producing a pair of shoes is 11 barrels of oil. By comparing the opportunity cost of producing shoes in the two countries, you can tell that has a comparative advantage in the production of shoes and has a comparative advantage in the production of oil. Suppose that Spain and Switzerland consider trading shoes and oil with each other. Spain can gain from specialization and trade as long as it receives more than of oil for each pair of shoes it exports to Switzerland. Similarly, Switzerland can gain from trade as long as it receives more than of shoes for each barrel of oil it exports to Spain. Based on your answer to the last question, which of the following terms of trade (that is, price of shoes in terms of oil) would allow both Switzerland and Spain to gain from trade? Check all that apply. O 13 barrels of oil per pair of shoes O 6 barrels of oil per pair of shoes O4 barrels of oil per pair of shoes O 1 barrel of oil per pair of shoes
Suppose that Spain and Switzerland both produce oil and shoes. Spain's opportunity cost of producing a pair of shoes is 3 barrels of oil while Switzerland's opportunity cost of producing a pair of shoes is 11 barrels of oil. By comparing the opportunity cost of producing shoes in the two countries, you can tell that has a comparative advantage in the production of shoes and has a comparative advantage in the production of oil. Suppose that Spain and Switzerland consider trading shoes and oil with each other. Spain can gain from specialization and trade as long as it receives more than of oil for each pair of shoes it exports to Switzerland. Similarly, Switzerland can gain from trade as long as it receives more than of shoes for each barrel of oil it exports to Spain. Based on your answer to the last question, which of the following terms of trade (that is, price of shoes in terms of oil) would allow both Switzerland and Spain to gain from trade? Check all that apply. O 13 barrels of oil per pair of shoes O 6 barrels of oil per pair of shoes O4 barrels of oil per pair of shoes O 1 barrel of oil per pair of shoes
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Suppose that Spain and Switzerland both produce oil and shoes. Spain's
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Transcribed Image Text:Suppose that Spain and Switzerland both produce oil and shoes. Spain's opportunity cost of producing a pair of shoes is 3 barrels of oil while
Switzerland's opportunity cost of producing a pair of shoes is 11 barrels of oil.
By comparing the opportunity cost of producing shoes in the two countries, you can tell that
has a comparative advantage in the
production of shoes and
has a comparative advantage in the production of oil.
Suppose that Spain and Switzerland consider trading shoes and oil with each other. Spain can gain from specialization and trade as long as it receives
more than
of oil for each pair of shoes it exports to Switzerland. Similarly, Switzerland can gain from trade as long as it receives more
than
of shoes for each barrel of oil it exports to Spain.
Based on your answer to the last question, which of the following terms of trade (that is, price of shoes in terms of oil) would allow both Switzerland and
Spain to gain from trade? Check all that apply.
O 13 barrels of oil per pair of shoes
O 6 barrels of oil per pair of shoes
O4 barrels of oil per pair of shoes
O 1 barrel of oil per pair of shoes
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