Business, 21.06.2021 16:40 shymitch32

Suppose that Portugal and Switzerland both produce fish and olives. Portugal's opportunity cost of producing a crate of olives is 3 pounds of fish while Switzerland's opportunity cost of producing a crate of olives is 11 pounds of fish. By comparing the opportunity cost of producing olives in the two countries, you can tell that has a comparative advantage in the production of olives and has a comparative advantage in the production of fish. Suppose that Portugal and Switzerland consider trading olives and fish with each other. Portugal can gain from specialization and trade as long as it receives more than of fish for each crate of olives it exports to Switzerland. Similarly, Switzerland can gain from trade as long as it receives more than of olives 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 olives in terms of fish) would allow both Switzerland and Portugal to gain from trade?

a. 6 pounds of fish per crate of olives
b. 2 pounds of fish per crate of olives
c. 8 pounds of fish per crate of olives
d. 18 pounds of fish per crate of olives

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Suppose that Portugal and Switzerland both produce fish and olives. Portugal's opportunity cost of p...

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