3. The price of tradeSuppose that Greece and Switzerland both produce fish and shoes. Greece's opportunity cost of producing a pair of shoes is 5 pounds of fish whileSwitzerland's opportunity cost of producing a pair of shoes is 10 pounds of fish.By comparing the opportunity cost of producing shoes in the two countries, you can tell thathas a comparative advantage in theproduction of shoes andhas a comparative advantage in the production of fish.Suppose that Greece and Switzerland consider trading shoes and fish with each other. Greece can gain from specialization and trade as long as itreceives more thanof fish for each pair of shoes it exports to Switzerland. Similarly, Switzerland can gain from trade as long as itreceives more thanof shoes for each pound of fish it exports to Greece.Based on your answer to the last question, which of the following prices of trade (that is, price of shoes in terms of fish) would allow both Switzerlandand Greece to gain from trade? Check all that apply.3 pounds of fish per pair of shoes9 pounds of fish per pair of shoes15 pounds of fish per pair of shoes8 pounds of fish per pair of shoes

Question
Asked Jan 30, 2020
31 views

Can someone please help me with this? I am not sure where to start. 

3. The price of trade
Suppose that Greece and Switzerland both produce fish and shoes. Greece's opportunity cost of producing a pair of shoes is 5 pounds of fish while
Switzerland's opportunity cost of producing a pair of shoes is 10 pounds of fish.
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 fish.
Suppose that Greece and Switzerland consider trading shoes and fish with each other. Greece can gain from specialization and trade as long as it
receives more than
of fish 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 pound of fish it exports to Greece.
Based on your answer to the last question, which of the following prices of trade (that is, price of shoes in terms of fish) would allow both Switzerland
and Greece to gain from trade? Check all that apply.
3 pounds of fish per pair of shoes
9 pounds of fish per pair of shoes
15 pounds of fish per pair of shoes
8 pounds of fish per pair of shoes
help_outline

Image Transcriptionclose

3. The price of trade Suppose that Greece and Switzerland both produce fish and shoes. Greece's opportunity cost of producing a pair of shoes is 5 pounds of fish while Switzerland's opportunity cost of producing a pair of shoes is 10 pounds of fish. 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 fish. Suppose that Greece and Switzerland consider trading shoes and fish with each other. Greece can gain from specialization and trade as long as it receives more than of fish 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 pound of fish it exports to Greece. Based on your answer to the last question, which of the following prices of trade (that is, price of shoes in terms of fish) would allow both Switzerland and Greece to gain from trade? Check all that apply. 3 pounds of fish per pair of shoes 9 pounds of fish per pair of shoes 15 pounds of fish per pair of shoes 8 pounds of fish per pair of shoes

fullscreen
check_circle

Expert Answer

Step 1

It is given that the opportunity cost of Greece in producing a pair of shoes is 5 pounds of fish and Switzerland’s opportunity cost of producing a pair of shoes is 10 pounds of fish. So, Greece must sacrifice 5 pounds of fish to produce a pair of shoes and Switzerland must sacrifice 10 pounds of fish to produce a pair of shoes. Greece must sacrifice 0.2 pair of shoes in order to produce a pound of fish and Switzerland needs to sacrifice 0.1 pair of shoes to produce a pound of fish.

Step 2

On comparing the opportunity costs of producing both the goods, it can be said that Greece has a comparative advantage in the production of shoes because Greece’s opportunity cost of producing a pair of shoes is lower than Switzerland’s opportunity cost of producing a pair of shoes.

Step 3

By the same way, Switzerland has comparative advantage in the production of fish because Switzerland’s opportuni...

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

Business

Economics

Related Economics Q&A

Find answers to questions asked by student like you
Show more Q&A
add
question_answer

Q: I am a Coinstar machine. I consume nickels (x) and dimes (y). I am always willing to trade two nicke...

A: Market Rate of Substitution: It is also known as marginal rate of substitution. It is the rate at wh...

question_answer

Q: The following graph shows the market for loanable funds in a closed economy. The upward-sloping oran...

A: The market for Loanable Funds defines how the borrowing and lending activities take place in the mar...

question_answer

Q: Construct the AD, SRAS, and LRAS curves for an economy experiencing (a) full employment, (b) an econ...

A: (a) Full employment: full employment is the situation in which all labors from the labor force work ...

question_answer

Q: Suppose Hong Kong is experiencing an economic recession. Explain with a diagram how the decrease in ...

A: An economy suffers from a recession when gross domestic product declines for more than two consecuti...

question_answer

Q: When comparing a primary market and a secondary market, which is true O the secondary market for sto...

A: Click to see the answer

question_answer

Q: 6. Given that Nathan has 10 acres and can grow 15 bales of hay or 40 bushels of corn on anacre, whil...

A: * Hello. Since your question has multiple sub-parts, we will solve first three sub-parts for you. If...

question_answer

Q: Why do firms, in the long run, continue to stay in the industry if they are earning 0 profits?

A: Answer - In the long run where the every input can vary and as in the long run where firms can make ...

question_answer

Q: Are all fixed costs also sunk costs?

A: Sunk Cost: It refers to the cost that is once incurred can’t be recovered.Fixed Cost: It is the cost...

question_answer

Q: How large will Canada’s GDP be in 25 years? The answer depends on what the rate of growth in    GDP ...

A: GDP2016 = $100 milliong = 0.035GDP2041 = GDP2016 (1+g)25                     = 100 million (1.035)25...