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5. The price of trade Suppose that Portugal and Austria both produce oil and stained glass. Portugal's opportunity cost of producing a pane of stained
5. The price of trade Suppose that Portugal and Austria both produce oil and stained glass. Portugal's opportunity cost of producing a pane of stained glass is 3 barrels of oil while Austria's opportunity cost of producing a pane of stained glass is 11 barrels of oil. By comparing the opportunity cost of producing stained glass in the two countries, you can tell that V has a comparative advantage in the production of stained glass and V has a comparative advantage in the production of oil. Suppose that Portugal and Austria consider trading stained glass and oil with each other. Portugal can gain from specialization and trade as long as it receives more than V of oil for each pane of stained glass it exports to Austria. Similarly, Austria can gain from trade as long as it receives more than V of stained glass for each barrel of oil it exports to Portugal. Based on your answer to the last question, which of the following prices of trade (that is, price of stained glass in terms of oil) would allow both Austria and Portugal to gain from trade? Check all that apply. 7 barrels of oil per pane of stained glass 1 barrel of oil per pane of stained glass 13 barrels of oil per pane of stained glass 10 barrels of oil per pane of stained glass
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