Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Suppose that Ireland and Liechtenstein both produce boots and liquor. Ireland's opportunity cost of producing a case of liquor is 4 pairs of boots while

Suppose that Ireland and Liechtenstein both produce boots and liquor. Ireland's opportunity cost of producing a case of liquor is 4 pairs of boots while Liechtenstein's opportunity cost of producing a case of liquor is 12 pairs of boots. By comparing the opportunity cost of producing liquor in the two countries, you can tell that has a comparative advantage in the production of liquor and has a comparative advantage in the production of boots. Suppose that Ireland and Liechtenstein consider trading liquor and boots with each other. Ireland can gain from specialization and trade as long as it receives more than of boots for each case of liquor it exports to Liechtenstein. Similarly, Liechtenstein can gain from trade as long as it receives more than of liquor for each pair of boots it exports to Ireland. Based on your answer to the last question, which of the following prices of trade (that is, price of liquor in terms of boots) would allow both Liechtenstein and Ireland to gain from trade? Check all that apply. 2 pairs of boots per case of liquor

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

China's Air Pollution Problems

Authors: Claudio O Delang

1st Edition

1317209281, 9781317209287

More Books

Students also viewed these Economics questions

Question

What are some guidelines for setting performance objectives?

Answered: 1 week ago

Question

Define Management or What is Management?

Answered: 1 week ago

Question

What do you understand by MBO?

Answered: 1 week ago

Question

What is meant by planning or define planning?

Answered: 1 week ago

Question

Define span of management or define span of control ?

Answered: 1 week ago