Suppose that Portugal and Denmark both produce jeans and wine. Portugal's opportunity cost of producing a bottle of wine is 4 pairs of jeans while Denmark's opportunity cost of producing a bottle of wine is 10 pairs of jeans.
By comparing the opportunity cost of producing wine in the two countries, you can tell that ______________ (Portugal, Denmark) has a comparative advantage in the production of wine and ___________ (Portugal, Denmark) has a comparative advantage in the production of jeans.
Suppose that Portugal and Denmark consider trading wine and jeans with each other. Portugal can gain from specialization and trade as long as it receives more than ___________ (1 pair, 1/10 pair, 1/4 pair, 4 pairs, 10 pairs) of jeans for each bottle of wine it exports to Denmark. Similarly, Denmark can gain from trade as long as it receives more than ____________ (1 bottle, 1/10 bottle, 1/4 bottle, 4 bottles, 10 bottles) of wine for each pair of jeans it exports to Portugal.
Based on your answer to the last question, which of the following prices of trade (that is, price of wine in terms of jeans) would allow both Denmark and Portugal to gain from trade? Check all that apply.
-- 1 pair of jeans per bottle of wine
-- 2 pairs of jeans per bottle of wine
-- 8 pairs of jeans per bottle of wine
-- 18 pairs of jeans per bottle of wine
Suppose that Portugal and Denmark both produce jeans and wine. Portugal's opportunity cost of producing a bottle of wine is 4 pairs of jeans while Denmark's opportunity cost of producing a bottle of wine is 10 pairs of jeans.
By comparing the opportunity cost of producing wine in the two countries, you can tell that ______________ (Portugal, Denmark) has a comparative advantage in the production of wine and ___________ (Portugal, Denmark) has a comparative advantage in the production of jeans.
Suppose that Portugal and Denmark consider trading wine and jeans with each other. Portugal can gain from specialization and trade as long as it receives more than ___________ (1 pair, 1/10 pair, 1/4 pair, 4 pairs, 10 pairs) of jeans for each bottle of wine it exports to Denmark. Similarly, Denmark can gain from trade as long as it receives more than ____________ (1 bottle, 1/10 bottle, 1/4 bottle, 4 bottles, 10 bottles) of wine for each pair of jeans it exports to Portugal.
Based on your answer to the last question, which of the following prices of trade (that is, price of wine in terms of jeans) would allow both Denmark and Portugal to gain from trade? Check all that apply.
-- 1 pair of jeans per bottle of wine
-- 2 pairs of jeans per bottle of wine
-- 8 pairs of jeans per bottle of wine
-- 18 pairs of jeans per bottle of wine
