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Chrome File Edit View History Bookmarks People Window Help News Analysis-Supply a Xyaplia: Student Question @ Current Students KC Secure https:/courses.aplia.com/af/servlet/quiz?quiz action takeQuiz&quiz; probGuid-Q... Ricardian Model Graded Assignment Back to Assignment Due Sunday 07.01.18 at 11:00 Attempts: Average: /8 3. Terms of trade Aa Aa Suppose that France and Germany both produce rye and shoes. France's opportunity cost of producing a pair of shoes is 3 pounds of rye, while Germany's opportunity cost of producing a pair of shoes is 7 pounds of rye. By comparing the opportunity costs of producing shoes in the two countries, you can determine that advantage in the production of rye. has a comparative advantage in the production of shoes and has a comparative Suppose that France and Germany consider trading shoes and rye with each other. France can gain specialization and trade as long as it receives more than Germany. Similarly, Germany can gain from trade as long as it receives more than pound of rye it exports to France. from of rye for each pair of shoes it exports to of shoes for each Based on your answer to the la of rye) would allow both Germany and France to gain from trade? Check all that apply st question, which of the following terms of trade (meaning the price of shoes in terms 8 pounds of rye per pair of shoes 4 pounds of rye per pair of shoes 1 pound of rye per pair of shoes 6 pounds of rye per pair of shoes Session Calendar 5927 15 MacBook AirExplanation / Answer
By comparing the opportunity cost of producing shoes in the two countries, you can determine that France has a comparative advantage in the production of shoes (because opportunity cost of producing shoes in France is less than opportunity cost of producing shoes in Germany). Therefore, Germany will have comparative advantage in production of the other good i.e. rye.
France can gain from specialization and trade as long as it gets more than 3 pounds of rye (the opportunity cost of producing shoes) for each pairs of shoes it exports to Germany. Germany on the other hand can gain from trade as long as it receives more than (1/7) pairs of shoes (the opportunity cost of producing each pound of rye) for each pound of rye it exports to France.
Both countries will gain from trade at any ratio that involves shoes selling for between 3 to 7 pounds of rye per pair of shoes.
Answer- option B and D
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