Aplia: Student Question x on: takeQuiz&quiz-probGuid-QNAPC0A80; 101 0000003b 167

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Aplia: Student Question x on: takeQuiz&quiz-probGuid-QNAPC0A80; 101 0000003b 167d70040000&ctx;=sus AB UHC DATA ENRY BPM ADMIN D AETNA ADMIN . Paylocity SHAR Ricardian Model Graded Assignment | Back to Assignment Due Sunday 12.10.17 at 11:45 PM Attempts: 6.8 7.9 Keep the Highest: 7.9/9 Terms of trade AaAa 1. Suppose that Portugal and Denmark both produce fish and stained glass. Portugal's opportunity cost of producing a pane of stained glass is 4 pounds of fish, while Denmark's opportunity cost of producing a pane of stained glass is 7 pounds of fish. By comparing the opportunity costs of producing stained glass in the two countries, you can determine that has a comparative advantage in the production of stained glass and has a comparative advantage in the production of fish. Suppose that Portugal and Denmark consider trading stained glass and fish with each other. Portugal can gain from specialization and trade as long as it receives more than exports to Denmark. Similarly, Denmark can gain from trade as long as it receives more than stained glass for each pound of fish it exports to Portugal. of fish for each pane of stained glass it of Based on your answer to the last question, which of the following terms of trade (meaning the price of stained glass in terms of fish) would allow both Denmark and Portugal to gain from trade? Check all that apply. 1 pound of fish per pane of stained glass 3pounds of fish per pane of stained glass 5 pounds of fish per pane of stained glass 8 pounds of fish per pane of stained glass Save & Continue QNA 3.16 © 2004-2016 Apta. All nghts reserved. © 2013 Cengage Leaning except a‘ noted. All rights reserved. ade It Now Continue without saving

Explanation / Answer

Portugal's opportunity cost of producing a pane of stained glass is 4 pounds of fish

So, Portugal's opportunity cost of producing 1 pound of fish = 1/4 pane of stained glass

Denmark's opportunity cost of producing a pane of stained glass is 7 pounds of fish

So, Denmark's opportunity cost of producing 1 pound of fish = 1/7 pane of stained glass

So, Portugal has a lower opportunity cost in the production of stained glass and Denmark has a lower opportunity cost in the production of fish.

Answer 1: Portugal has a comparative advantage in the production of stained glass and Denmark has a comparative advantage in the production of fish.

Answer 2: First blank: 4 pounds, Second blank: 1/7 pane

Explanation: Portugal can produce 1 pane of stained glass at the cost of 4 pounds of fish. So, it will agree to sale a pane of stained glass as long as it received more than 4 pounds of fish. Similarly, Denmark can produce 1 pound of fish at the cost of 1/7 pane of stained glass. So, it will agree to sale a pound of fish as long as it receives more than 1/7 pane of glass in return.

Answer 3: the Right answer is option 3.

This will satisfy both the parties as Portugal will receive 5 pounds of fish in lieu of 1 pane of stained glass and Denmark will receive 1/5 pane of glass in lieu of 1 pound of fish.

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