Due on Jun 17 at 11:59 PM EDT Back to Assignment Attempts: Score: /3 1. The pric

Question

Due on Jun 17 at 11:59 PM EDT Back to Assignment Attempts: Score: /3 1. The price of trade Suppose that Greece and Switzerland both produce oil and olives. Greece's opportunity cost of producing a crate of olives is 5 barrels of oil while Switzerland's opportunity cost of producing a crate of olives is 10 barrels of oil. By comparing the opportunity cost of producing olives in the two countries, you can tell that Greece production of olives and Switzerland has a comparative advantage in the production of oil. has a comparative advantage in the Suppose that Greece and Switzerland consider trading olives and oil with each other. Greece can gain from specialization and trade as long as it receives more than 5 barrels ? of ol for each crate of Olives it exports to Switzerland. Similarly, Switzerland can gain from trade as long as it receives more than 10 crates of olives for each barrel of oil it exports to Greece. Based on your answer to the last question, which of the following prices of trade (that is, price of olives in terms of oil) would allow both Switzerland and Greece to gain from trade? Check all that apply. 1 barrel of oil per crate of olives 9 barrels of oil per crate of olives 2 barrels of oil per crate of olives 12 barrels of oil per crate of olives Sa ve & Continue

Explanation / Answer

I think first 2 blanks are correct. but in 4th blank it should be more than 1 crate and not more than 10 crates of olives.

In the 3rd question.Option (b) should be correct as we seen in above question that for greece at least 5 barrels of oil should be given for each crate of olives it exports. So the no of barrels to be exchanged for a crate should be > 5.

Moreover in option (d) if 12 barrels of oil are exchanged then that would be a loss to switzerland as its opportunity cost is only 1/10 and if it .

SO I think option (b) should be correct.

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