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Suppose that Portugal and Sweden both produce fish and olives. Portugal's opportunity cost of producing a crate of olives is 3 pounds of fish while Sweden's opportunity cost of producing a crate of olives is 11 pounds of fish. By comparing the opportunity cost of producing olives in the two countries, you can tell that has a comparative advantage in the production of olives and v has a comparative advantage in the production of fish. Suppose that Portugal and Sweden consider trading olives and fish with each other. Portugal can gain from specialization and trade as long as it receives more than of fish for each crate of olives it exports to Sweden. Similarly, Sweden can gain from trade as long as it receives more than v of olives for each pound of fish it exports to Portugal.

Suppose that Portugal and Sweden both produce fish and olives. Portugal's opportunity cost of producing a crate of olives is 3 pounds of fish while Sweden's opportunity cost of producing a crate of olives is 11 pounds of fish. By comparing the opportunity cost of producing olives in the two countries, you can tell that has a comparative advantage in the production of olives and v has a comparative advantage in the production of fish. Suppose that Portugal and Sweden consider trading olives and fish with each other. Portugal can gain from specialization and trade as long as it receives more than of fish for each crate of olives it exports to Sweden. Similarly, Sweden can gain from trade as long as it receives more than v of olives for each pound of fish it exports to Portugal.

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
Problem 5PA
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5. The price of trade Suppose that Portugal and Sweden both produce fish and olives. Portugal's opportunity cost of producing a crate of olives is 3 pounds of fish while Sweden's opportunity cost of producing a crate of olives is 11 pounds of fish. By comparing the opportunity cost of producing olives in the two countries, you can tell that has a comparative advantage in the production of olives and v has a comparative advantage in the production of fish. Suppose that Portugal and Sweden consider trading olives and fish with each other. Portugal can gain from specialization and trade as long as it receives more than v of fish for each crate of olives it exports to Sweden. Similarly, Sweden can gain from trade as long as it receives more than v of olives for each pound of fish it exports to Portugal. Based on your answer to the last question, which of the following prices of trade (that is, price of olives in terms of fish) would allow both Sweden and Portugal to gain from trade? Check all that apply. O 1 pound of fish per crate of olives 4 pounds of fish per crate of olives O 13 pounds of fish per crate of olives O 2 pounds of fish per crate of olives
Transcribed Image Text:5. The price of trade Suppose that Portugal and Sweden both produce fish and olives. Portugal's opportunity cost of producing a crate of olives is 3 pounds of fish while Sweden's opportunity cost of producing a crate of olives is 11 pounds of fish. By comparing the opportunity cost of producing olives in the two countries, you can tell that has a comparative advantage in the production of olives and v has a comparative advantage in the production of fish. Suppose that Portugal and Sweden consider trading olives and fish with each other. Portugal can gain from specialization and trade as long as it receives more than v of fish for each crate of olives it exports to Sweden. Similarly, Sweden can gain from trade as long as it receives more than v of olives for each pound of fish it exports to Portugal. Based on your answer to the last question, which of the following prices of trade (that is, price of olives in terms of fish) would allow both Sweden and Portugal to gain from trade? Check all that apply. O 1 pound of fish per crate of olives 4 pounds of fish per crate of olives O 13 pounds of fish per crate of olives O 2 pounds of fish per crate of olives
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