Due Sunday 12.10.17 at 11:45 PM Attempts: Do No Harm: 18 3. Terms of trade AaAa

Question

Due Sunday 12.10.17 at 11:45 PM Attempts: Do No Harm: 18 3. Terms of trade AaAa Suppose that Italy and Germany both produce jeans and wine. Italy's opportunity cost of producing a bottle of wine Is 3 pairs of jeans, while Germany's opportunity cost of producing a bottle of wine is 6 pairs of jeans. By comparing the opportunity costs of producing wine In the two countries, you can determine that has a comparative advantage in the production of wine and production of jeans. has a comparative advantage in the Suppose that Italy and Germany consider trading wine and jeans with each other. Italy can gain from specialization and trade as long as it Similarly, Germany can gain from trade as long as it receives more than jeans it exports to Italy of jeans for each bottle of wine it exports to Germany. of wine for each pair of receives more than Based on your answer to the last question, which of the following terms of trade (meaning the price of wine in terms of jeans) would allow both Germany and Italy to gain from trade? Check all that apply. 2 pairs of jeans per bottle of wine 1 pair of jeans per bottle of wine 7 pairs of jeans per bottle of wine 4 pairs of jeans per bottle of wine

Explanation / Answer

Answer to blank 1: Italy

Answer to blank 2: Germany

Answer to blank 3: 3 pairs

Answer to blank 4: 0.17 bottle     (i.e. 1 / 6 = 0.17)

Ans: 4 pairs of jeans per bottle of wine

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.