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Business, 26.02.2020 21:21 elijahjacksonrp6z2o7

Suppose that Spain and Switzerland both produce rye and cheese. Spain's opportunity cost of producing a pound of cheese is 4 bushels of rye while Switzerland's opportunity cost of producing a pound of cheese is 10 bushels of rye. By comparing the opportunity cost of producing cheese in the two countries, you can tell thatSpain has a comparative advantage in the production of cheese andSwitzerland has a comparative advantage in the production of rye. Suppose that Spain and Switzerland consider trading cheese and rye with each other. Spain can gain from specialization and trade as long as it receives more than4 bushels of rye 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 bushel of rye it exports to Spain.

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