By comparing the opportunity cost of producing stained glass in the two countrie
ID: 1166808 • Letter: B
Question
By comparing the opportunity cost of producing stained glass in the two countries, you can tell that (Greece/Switzerland) has a comparative advantage in the production of stained glass and (Switzerland/Greece) has a comparative advantage in the production of rye.
Suppose that Greece and Switzerland consider trading stained glass and rye with each other. Greece can gain from specialization and trade as long as it receives more than (1 bushel/ 1/11 bushel / 1/5 bushel / 5 bushels/ 11 bushels) of rye for each pane of stained glass it exports to Switzerland. Similarly, Switzerland can gain from trade as long as it receives more than (1 pane/ 1/11 pane / 1/5 pane / 5 panes/ 11 panes) of stained glass for each bushel of rye it exports to Greece.
5. The price of trade Suppose that Greece and Switzerland both produce rye and stained glass. Greece's opportunity cost of producing a pane of stained glass is 5 bushels of rye while Switzerland's opportunity cost of poducing a pane of stained glass is 11 bushels of rye.Explanation / Answer
In Greece opportunity cost for glass is 5 bushels of rye and Switzerland has an opportunity cost of 11 bushels of rye hence opportunity cost is higher for stained glass for Switzerland therefore Greece has an Competitive advantage in the production of Glass
Greece has an opportunity Cost to produce 1 bushel of rye is 1/5 stained glasses whereas and Switzerland has an opportunity cost to produce 1 bushel of rye is 1/11 stained glasses here opportunity cost is higher for Greece therefore Switzerland has a Competitive advantage in the production of bushels of rye
Greece has an opportunity Cost of 1/5 bushels of rye then it will trade for anything more than 1/5 bushels similarly Switzerland has an opportunity cost of 1/11 bushels of rye then it will trade for anything more than 1/11 bushels
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