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5. The price of trade Suppose that Portugal and Sweden both produce rye and wine. Portugal's opportunity cost of producing a bottle of wine is 4 bushels of rye while Sweden's opportunity cost of producing a bottle of wine is 10 bushels of rye. By comparing the opportunity cost of producing wine in the two countries, you can tell that has a comparative advantage in the production of wine and v has a comparative advantage in the production of rye. Suppose that Portugal and Sweden consider trading wine and rye with each other. Portugal can gain from specialization and trade as long as it receives more than v of rye for each bottle of wine it exports to Sweden. Similarly, Sweden can gain from trade as long as it receives more than v of wine for each bushel of rye 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 rye) would allow both Sweden and Portugal to gain from trade? Check all that apply. 18 bushels of rye per bottle of wine O 1 bushel of rye per bottle of wine bushels of rye per bottle of wine 9 bushels of rye per bottle of wine

5. The price of trade Suppose that Portugal and Sweden both produce rye and wine. Portugal's opportunity cost of producing a bottle of wine is 4 bushels of rye while Sweden's opportunity cost of producing a bottle of wine is 10 bushels of rye. By comparing the opportunity cost of producing wine in the two countries, you can tell that has a comparative advantage in the production of wine and v has a comparative advantage in the production of rye. Suppose that Portugal and Sweden consider trading wine and rye with each other. Portugal can gain from specialization and trade as long as it receives more than v of rye for each bottle of wine it exports to Sweden. Similarly, Sweden can gain from trade as long as it receives more than v of wine for each bushel of rye 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 rye) would allow both Sweden and Portugal to gain from trade? Check all that apply. 18 bushels of rye per bottle of wine O 1 bushel of rye per bottle of wine bushels of rye per bottle of wine 9 bushels of rye per bottle of wine

Principles of Macroeconomics (MindTap Course List)
Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781305971509
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter3: Interdependence And The Gains Rrom Trade
Section: Chapter Questions
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5. The price of trade Suppose that Portugal and Sweden both produce rye and wine. Portugal's opportunity cost of producing a bottle of wine is 4 bushels of rye while Sweden's opportunity cost of producing a bottle of wine is 10 bushels of rye. By comparing the opportunity cost of producing wine in the two countries, you can tell that has a comparative advantage in the production of wine and has a comparative advantage in the production of rye. Suppose that Portugal and Sweden consider trading wine and rye with each other. Portugal can gain from specialization and trade as long as it receives more than of rye for each bottle of wine it exports to Sweden. Similarly, Sweden can gain from trade as long as it receives more than of wine for each bushel of rye 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 rye) would allow both Sweden and Portugal to gain from trade? Check all that apply. 18 bushels of rye per bottle of wine U 1 bushel of rye per bottle of wine 6 bushels of rye per bottle of wine O 9 bushels of rye per bottle of wine
Transcribed Image Text:5. The price of trade Suppose that Portugal and Sweden both produce rye and wine. Portugal's opportunity cost of producing a bottle of wine is 4 bushels of rye while Sweden's opportunity cost of producing a bottle of wine is 10 bushels of rye. By comparing the opportunity cost of producing wine in the two countries, you can tell that has a comparative advantage in the production of wine and has a comparative advantage in the production of rye. Suppose that Portugal and Sweden consider trading wine and rye with each other. Portugal can gain from specialization and trade as long as it receives more than of rye for each bottle of wine it exports to Sweden. Similarly, Sweden can gain from trade as long as it receives more than of wine for each bushel of rye 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 rye) would allow both Sweden and Portugal to gain from trade? Check all that apply. 18 bushels of rye per bottle of wine U 1 bushel of rye per bottle of wine 6 bushels of rye per bottle of wine O 9 bushels of rye per bottle of wine
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