Business, 15.02.2021 19:50 bearbri5851

Suppose that Italy and Denmark both produce oil and stained glass. Italy's opportunity cost of producing a pane of stained glass is 4 barrels of oil while Denmark's opportunity cost of producing a pane of stained glass is 10 barrels of oil. By comparing the opportunity cost of producing stained glass in the two countries, you can tell that has a comparative advantage in the production of stained glass and has a comparative advantage in the production of oil. Suppose that Italy and Denmark consider trading stained glass and oil with each other. Italy can gain from specialization and trade as long as it receives more than of oil for each pane of stained glass it exports to Denmark. Similarly, Denmark can gain from trade as long as it receives more thanof stained glass for each barrel of oil it exports to Italy.

Based on your answer to the last question, which of the following prices of trade (that is, price of stained glass in terms of oil) would allow both Denmark and Italy to gain from trade?

a. 6 barrels of oil per pane of stained glass
b. 3 barrels of oil per pane of stained glass
c. 18 barrels of oil per pane of stained glass
d. 1 barrel of oil per pane of stained glass

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Suppose that Italy and Denmark both produce oil and stained glass. Italy's opportunity cost of produ...

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