Suppose that Greece and Sweden both produce oil and cheese. Greece's opportunity cost of producing a pound of cheese is 4 barrels of oil while Sweden's opportunity cost of producing a pound of cheese is 10 barrels of oil. 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 oil.   Suppose that Greece and Sweden consider trading cheese and oil with each other. Greece can gain from specialization and trade as long as it receives more than    of oil for each pound of cheese it exports to Sweden. Similarly, Sweden can gain from trade as long as it receives more than    of cheese for each barrel of oil it exports to Greece.   Based on your answer to the last question, which of the following prices of trade (that is, price of cheese in terms of oil) would allow both Sweden and Greece to gain from trade? Check all that apply. 1 barrel of oil per pound of cheese   6 barrels of oil per pound of cheese   18 barrels of oil per pound of cheese   3 barrels of oil per pound of cheese

Suppose that Bob and Jimmy both have 10 hours of time that they can use to do one of two things: make pasta or make hamburgers. Bob can make 15 hamburgers in one hour and 3 plates of pasta in one hour. Jimmy can make 8 hamburgers in one hour and 2 plates of pasta in one hour. Who has comparative in the production of hamburgers? Who has comparative advantage in the production of pasta?   If Bob and Jimmy trade, who should specialize in producing hamburgers and who should specialize in producing pancakes? Give an example of terms of trade at which mutually beneficial trade would be possible between Bob and Jimmy.

When a country speciallizes in the production of a good, this means that it can produce this good at a lower opportunity cost than Its trading partner. Because of this comparative advantage, both countries benefit when they specialize and trade with each other. The following graphs show the production possibilitles frontlers (PPFS) for Maldonia and Sylvanla. Both countries produce lemons and coffee, each Initlally (that is, before specialization and trade) producing 18 million pounds of lemons and 9 million pounds of coffee, as Indicated by grey points (star symbols) labeled point A. Maldonia Sylvania 48 48 42 42 36 36 PPF 30 30 24 24 18 PPF 18 12 12 6 12 18 24 30 36 42 48 12 18 24 30 36 42 48 LEMONS (Milions of pounds) LEMONS (Millions of pounds) Maldonia has a comparative advantage in the production of while Sylvania has a comparative advantage in the . If each fully specializes (that is, produces only the good for which each has a comparative production of advantage), the most the…

Consider the following information: Country A's opportunity cost of producing vegetables is lower than Country B's. Country B's opportunity cost of producing electronics is lower than Country A's. Country A is absolutely better at producing both goods. If the two countries decide to specialize and trade then: O Each country will be able to produce and consume at a point outside their production possibilities frontier. O Each country will be able to consume at a point outside their production possibilities frontier. O Each country will be able to produce at a point outside their production possibilities frontier. O Each country's production possibilities frontier will shift outward. « Previous Next ASUS 17 6 8