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Business, 15.02.2021 19:40 rose3358

Suppose that Spain and Germany both produce rye and shoes. Spain's opportunity cost of producing a pair of shoes is 5 bushels of rye while Germany's opportunity cost of producing a pair of shoes is 10 bushels of rye. By comparing the opportunity cost of producing shoes in the two countries, you can tell thatSpain has a comparative advantage in the production of shoes andGermany has a comparative advantage in the production of rye. Suppose that Spain and Germany consider trading shoes and rye with each other. Spain can gain from specialization and trade as long as it receives more than5 bushels of rye for each pair of shoes it exports to Germany. Similarly, Germany can gain from trade as long as it receives more than1/10 pair of shoes 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 shoes in terms of rye) would allow both Germany and Spain to gain from trade?a. 9 bushels of rye per pair of shoes b. 3 bushels of rye per pair of shoes c. 1 bushel of rye per pair of shoes d. 8 bushels of rye per pair of shoes

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Suppose that Spain and Germany both produce rye and shoes. Spain's opportunity cost of producing a p...
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