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5. The price of trade Suppose that Slovenia and Slovakia both produce sunflowers and shoes. Slovenia's opportunity cost of producing a pair of shoes is
5. The price of trade Suppose that Slovenia and Slovakia both produce sunflowers and shoes. Slovenia's opportunity cost of producing a pair of shoes is 5 bushels of sunflowers while Slovakia's opportunity cost of producing a pair of shoes is 9 bushels of sunflowers. 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 sunflowers. Suppose that Slovenia and Slovakia consider trading shoes and sunflowers with each other, Slovenia can gain from specialization and trade as long as it receives more than of sunflowers for each pair of shoes it exports to Slovakia. Similarly, Slovakia can gain from trade as long as it receives more than of shoes for each bushel of sunflowers it exports to Slovenia. Based on your answer to the last question, which of the following prices of trade (that is, price of shoes in terms of sunflowers) would allow both Slovakia and Slovenia to gain from trade? Check all that apply. O 8 bushels of sunflowers per pair of shoes O 1 bushel of sunflowers per pair of shoes O 3 bushels of sunflowers per pair of shoes O 7 bushels of sunflowers per pair of shoes
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