Business, 13.10.2020 03:01 pumaben2864

Suppose that France and Sweden both produce jeans and olives. France’s opportunity cost of producing a crate of olives is 4 pairs of jeans, while Sweden’s opportunity cost of producing a crate of olives is 10 pairs of jeans. 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 jeans. Suppose that France and Sweden consider trading olives and jeans with each other. France can gain from specialization and trade as long as it receives more than of jeans for each crate of olives it exports to Sweden. Similarly, Sweden can gain from trade as long as it receives more than of olives for each pair of jeans it exports to France. Based on your answers to the previous question, which of the following terms of trade (that is, price of olives in terms of jeans) would allow both Sweden and France to gain from trade? a. 1 pair of jeans per crate of olives b. 2 pairs of jeans per crate of olives c. 16 pairs of jeans per crate of olives d. 7 pairs of jeans per crate of olives

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Suppose that France and Sweden both produce jeans and olives. France’s opportunity cost of producing...

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