Suppose that Spain and Austria both produce rye and stained glass. Spain's opportunity cost of producing a pane of stained glass is 5 bushels of rye while Austria's opportunity cost of producing a pane of stained glass is 10 bushels of rye. By comparing the opportunity cost of producing stained glass in the two countries, you can tell that has a comparative advantage in the production of stained glass and has a comparative advantage in the production of rye. Suppose that Spain and Austria consider trading stained glass and rye with each other. Spain can gain from specialization and trade as long as it receives more than each pane of stained glass it exports to Austria. Similarly, Austria can gain from trade as long as it receives more than of rye for of stained glass for each bushel of rye it exports to Spain. Based on your answer to the last question, which of the following prices of trade (that is, price of stained glass in terms of rye) would allow both Austria and Spain to gain from trade? Check all that apply. 9 bushels of rye per pane of stained glass n 15 bushels of rye per pane of stained glass 8 bushels of rye per pane of stained glass 3 bushels of rye per pane of stained glass
Suppose that Spain and Austria both produce rye and stained glass. Spain's opportunity cost of producing a pane of stained glass is 5 bushels of rye while Austria's opportunity cost of producing a pane of stained glass is 10 bushels of rye. By comparing the opportunity cost of producing stained glass in the two countries, you can tell that has a comparative advantage in the production of stained glass and has a comparative advantage in the production of rye. Suppose that Spain and Austria consider trading stained glass and rye with each other. Spain can gain from specialization and trade as long as it receives more than each pane of stained glass it exports to Austria. Similarly, Austria can gain from trade as long as it receives more than of rye for of stained glass for each bushel of rye it exports to Spain. Based on your answer to the last question, which of the following prices of trade (that is, price of stained glass in terms of rye) would allow both Austria and Spain to gain from trade? Check all that apply. 9 bushels of rye per pane of stained glass n 15 bushels of rye per pane of stained glass 8 bushels of rye per pane of stained glass 3 bushels of rye per pane of stained glass
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
Problem 4PA
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Comparative advantage is when nation is able to produce a good at a lower opportunity cost.
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