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Suppose that Portugal and Austria both produce rye and cheese. Portugal's opportunity cost of producing a pound of cheese is 5 bushels of rye while Austria's opportunity cost of producing a pound of cheese is 10 bushels of rye. By comparing the opportunity cost of producing cheese in the two countries, you can tell that has a comparative advantage in the production of cheese and has a comparative advantage in the production of rye. Suppose that Portugal and Austria consider trading cheese and rye with each other. Portugal can gain from specialization and trade as long as it receives more than of rye for each pound of cheese it exports to Austria. Similarly, Austria can gain from trade as long as it receives more than. of cheese 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 cheese in terms of rye) would allow both Austria and Portugal to gain from trade? Check all that apply. O 9 bushels of rye per pound of cheese O 3 bushels of rye per pound cheese O 15 bushels of rye per pound of cheese O 1 bushel of rye per pound of cheese

Suppose that Portugal and Austria both produce rye and cheese. Portugal's opportunity cost of producing a pound of cheese is 5 bushels of rye while Austria's opportunity cost of producing a pound of cheese is 10 bushels of rye. By comparing the opportunity cost of producing cheese in the two countries, you can tell that has a comparative advantage in the production of cheese and has a comparative advantage in the production of rye. Suppose that Portugal and Austria consider trading cheese and rye with each other. Portugal can gain from specialization and trade as long as it receives more than of rye for each pound of cheese it exports to Austria. Similarly, Austria can gain from trade as long as it receives more than. of cheese 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 cheese in terms of rye) would allow both Austria and Portugal to gain from trade? Check all that apply. O 9 bushels of rye per pound of cheese O 3 bushels of rye per pound cheese O 15 bushels of rye per pound of cheese O 1 bushel of rye per pound of cheese

Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter3: Interdependence And The Gains From Trade
Section: Chapter Questions
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Suppose that Portugal and Austria both produce rye and cheese. Portugal's opportunity cost of producing a pound of cheese is 5 bushels of rye while Austria's opportunity cost of producing a pound of cheese is 10 bushels of rye. By comparing the opportunity cost of producing cheese in the two countries, you can tell that has a comparative advantage in the production of cheese and has a comparative advantage in the production of rye. Suppose that Portugal and Austria consider trading cheese and rye with each other. Portugal can gain from specialization and trade as long as it receives more than of rye for each pound of cheese it exports to Austria. Similarly, Austria can gain from trade as long as it receives more than. of cheese 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 cheese in terms of rye) would allow both Austria and Portugal to gain from trade? Check all that apply. O 9 bushels of rye per pound of cheese O 3 bushels of rye per pound of cheese O 15 bushels of rye per pound of cheese O 1 bushel of rye per pound of cheese
Transcribed Image Text:Suppose that Portugal and Austria both produce rye and cheese. Portugal's opportunity cost of producing a pound of cheese is 5 bushels of rye while Austria's opportunity cost of producing a pound of cheese is 10 bushels of rye. By comparing the opportunity cost of producing cheese in the two countries, you can tell that has a comparative advantage in the production of cheese and has a comparative advantage in the production of rye. Suppose that Portugal and Austria consider trading cheese and rye with each other. Portugal can gain from specialization and trade as long as it receives more than of rye for each pound of cheese it exports to Austria. Similarly, Austria can gain from trade as long as it receives more than. of cheese 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 cheese in terms of rye) would allow both Austria and Portugal to gain from trade? Check all that apply. O 9 bushels of rye per pound of cheese O 3 bushels of rye per pound of cheese O 15 bushels of rye per pound of cheese O 1 bushel of rye per pound of cheese
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Comparative advantage refers to the ability to produce goods and services at a lower opportunity cost than the competitor. Theory of comparative advantage promotes specialisation and trade. 

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