5. The price of trade

Suppose that France and Switzerland both produce rye and shoes. France's opportunity cost of producing a pair of shoes is 3 bushels of rye while Switzerland's opportunity cost of producing a pair of shoes is 11 bushels of rye.

By comparing the opportunity cost of producing shoes in the two countries, you can tell thatFrance has a comparative advantage in the production of shoes andSwitzerland has a comparative advantage in the production of rye.

Suppose that France and Switzerland consider trading shoes and rye with each other. France can gain from specialization and trade as long as it receives more than of rye for each pair of shoes it exports to Switzerland. Similarly, Switzerland can gain from trade as long as it receives more than of shoes for each bushel of rye it exports to France.

Based on your answer to the last question, which of the following prices of trade (that is, price of shoes in terms of rye) would allow both Switzerland and France to gain from trade?Check all that apply.

13 bushels of rye per pair of shoes

2 bushels of rye per pair of shoes

6 bushels of rye per pair of shoes

4 bushels of rye per pair of shoes