Suppose that Italy and Switzerland both produce jeans and olives. Italy's opportunity cost of producing a crate of olives is 5 pairs of jeans while Switzerland's opportunity cost of producing a crate of olives is 10 pairs of jeans. By comparing the opportunity cost of producing olives in the two countries, you can tell that has a comparative advantage in the 目 production of olives and has a comparative advantage in the production of jeans. Suppose that Italy and Switzerland consider trading olives and jeans with each other. Italy can gain from specialization and trade as long as it receives more than of jeans for each crate of olives it exports to Switzerland. Similarly, Switzerland can gain from trade as long as it receives more than of olives for each pair of jeans it exports to Italy. Based on your answer to the last question, which of the following prices of trade (that is, price of olives in terms of jeans) would allow both Switzerland and Italy to gain from trade? Check all that apply. O 1 pair of jeans per crate of olives O 9 pairs of jeans per crate of olives 8 pairs of jeans per crate of olives O 15 pairs of jeans per crate of olives O O O 日

Suppose that Italy and Switzerland both produce jeans and olives. Italy's opportunity cost of producing a crate of olives is 5 pairs of jeans while Switzerland's opportunity cost of producing a crate of olives is 10 pairs of jeans. By comparing the opportunity cost of producing olives in the two countries, you can tell that has a comparative advantage in the 目 production of olives and has a comparative advantage in the production of jeans. Suppose that Italy and Switzerland consider trading olives and jeans with each other. Italy can gain from specialization and trade as long as it receives more than of jeans for each crate of olives it exports to Switzerland. Similarly, Switzerland can gain from trade as long as it receives more than of olives for each pair of jeans it exports to Italy. Based on your answer to the last question, which of the following prices of trade (that is, price of olives in terms of jeans) would allow both Switzerland and Italy to gain from trade? Check all that apply. O 1 pair of jeans per crate of olives O 9 pairs of jeans per crate of olives 8 pairs of jeans per crate of olives O 15 pairs of jeans per crate of olives O O O 日

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter7: Economic Growth: Theory And Policy

Section: Chapter Questions

Problem 1DQ

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