Suppose that Portugal and Austria both produce beer and shoes. Portugal's opportunity cost of producing a pair of shoes is 4 barrels of beer while Austria's opportunity cost of producing a pair of shoes is 10 barrels of beer. By comparing the opportunity cost of producing shoes in the two countries, you can tell that has a comparative advantage in the production of shoes and has a comparative advantage in the production of beer. Suppose that Portugal and Austria consider trading shoes and beer with each other. Portugal can gain from specialization and trade as long as it receives more than of beer for each pair of shoes it exports to Austria. Similarly, Austria can gain from trade as long as it receives more than of shoes for each barrel of beer it exports to Portugal. Based on your answer to the last question, which of the following prices of trade (that is, price of shoes in terms of beer) would allow both Austria and Portugal to gain from trade? a. 1 barrel of oil per pair of shoes
b. 9 barrels of oil per pair of shoes
c. 3 barrels of oil per pair of shoes
d. 8 barrels of oil per pair of shoes