1. Business
  2. Economics
  3. 5 the price of trade suppose that portugal and sweden...

Question: 5 the price of trade suppose that portugal and sweden...

Question details

5. The price of trade Suppose that Portugal and Sweden both produce fish and shoes. Portugals opportunity cost of producing a pair of shoes is 4 pounds of fish while Swedens opportunity cost of producing a pair of shoes is 8 pounds of fish. By comparing the opportunity cost of producing shoes in the two countries, you can tell thath production of shoes and has a comparative advantage in the has a comparative advantage in the production of fish. Suppose that Portugal and Sweden consider trading shoes and fish with each other. Portugal can gain from specialization and trade as long as it receives more thanof fish for each pair of shoes it exports to Sweden. Similarly, Sweden can gain from trade as long as it receives more tharn ▼ of shoes for each pound of fish 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 fish) would allow both Sweden and Portugal to gain from trade? Check all that apply 2 pounds of fish per pair of shoes 6 pounds of fish per pair of shoes 7 pounds of fish per pair of shoes □ 1 pound of fish per pair of shoes

Solution by an expert tutor
Blurred Solution
This question has been solved
Subscribe to see this solution