Suppose that Spain and Switzerland both produce oil and cheese. Spain's opportunity cost of producing a pound of cheese is 4 barrels of oil while Switzerland'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 Spain and Switzerland consider trading cheese and oil with each other. Spain can gain from specialization and trade as long as it receives more than of oil for each pound of cheese it exports to Switzerland. Similarly, Switzerland can gain from trade as long as it receives more than of cheese for each barrel of oil it exports to Spain. 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 Switzerland and Spain to gain from trade? Check all that apply. 18 barrels of oil per pound of cheese 9 barrels of oil per pound of cheese 6 barrels of oil per pound of cheese 3 barrels of oil per pound of cheese
Suppose that Spain and Switzerland both produce oil and cheese. Spain's opportunity cost of producing a pound of cheese is 4 barrels of oil while Switzerland'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 Spain and Switzerland consider trading cheese and oil with each other. Spain can gain from specialization and trade as long as it receives more than of oil for each pound of cheese it exports to Switzerland. Similarly, Switzerland can gain from trade as long as it receives more than of cheese for each barrel of oil it exports to Spain. 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 Switzerland and Spain to gain from trade? Check all that apply. 18 barrels of oil per pound of cheese 9 barrels of oil per pound of cheese 6 barrels of oil per pound of cheese 3 barrels of oil per pound of cheese
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Suppose that Spain and Switzerland both produce oil and cheese. Spain's opportunity cost of producing a pound of cheese is 4 barrels of oil while Switzerland'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 Spain and Switzerland consider trading cheese and oil with each other. Spain can gain from specialization and trade as long as it receives more than of oil for each pound of cheese it exports to Switzerland. Similarly, Switzerland can gain from trade as long as it receives more than of cheese for each barrel of oil it exports to Spain.
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 Switzerland and Spain to gain from trade? Check all that apply.
18 barrels of oil per pound of cheese
9 barrels of oil per pound of cheese
6 barrels of oil per pound of cheese
3 barrels of oil per pound of cheese
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