Business, 21.01.2021 23:10 agilitygirl1
Suppose that Greece and Austria both produce fish and cheese. Greece's opportunity cost of producing a pound of cheese is 4 pounds of fish while Austria's opportunity cost of producing a pound of cheese is 10 pounds of fish.
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 fish. Suppose that Greece and Austria consider trading cheese and fish with each other. Greece can gain from specialization and trade as long as it receives more than of fish 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 pound of fish it exports to Greece.
Based on your answer to the last question, which of the following terms of trade (that is, price of cheese in terms of fish) would allow both Austria and Greece to gain from trade? Check all that apply.
a. 18 pounds of fish per pound of cheese
b. 9 pounds of fish per pound of cheese
c. 1 pound of fish per pound of cheese
d. 3 pounds of fish per pound of cheese
Answers: 2
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Suppose that Greece and Austria both produce fish and cheese. Greece's opportunity cost of producing...
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