Business, 02.03.2020 23:56 brisafe2023
Suppose that Portugal and Denmark both produce oil and shoes. Portugal's opportunity cost of producing a pair of shoes is 3 barrels of oil while Denmark's opportunity cost of producing a pair of shoes is 11 barrels of oil. By comparing the opportunity cost of producing shoes in the two countries, you can tell that has a comparative advantage in the production of shoes and has a comparative advantage in the production of oil. Suppose that Portugal and Denmark consider trading shoes and oil with each other. Portugal can gain from specialization and trade as long as it receives more than of oil for each pair of shoes it exports to Denmark. Similarly, Denmark can gain from trade as long as it receives more than of shoes for each barrel of oil it exports to Portugal. Based on your answer to the last question, which of the following prices of trade (that is, price of shoes in terms of oil) would allow both Denmark and Portugal to gain from trade? Check all that apply. 2 barrels of oil per pair of shoes 6 barrels of oil per pair of shoes 1 barrel of oil per pair of shoes 4 barrels of oil per pair of shoes
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Suppose that Portugal and Denmark both produce oil and shoes. Portugal's opportunity cost of produci...
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