View the step-by-step solution to:

Question

Suppose that Spain and Tunisia both produce oil and wine. Spain's opportunity cost of producing a bottle of wine

is 5 barrels of oil while Tunisia's opportunity cost of producing a bottle of wine is 10 barrels of oil.


By comparing the opportunity cost of producing wine in the two countries, you can tell that Blank?  has a comparative advantage in the production of wine and BLANK?  has a comparative advantage in the production of oil.


1st blank

-Spain

-Tunisia


2nd blank

-Spain

-Tunisia


Suppose that Spain and Tunisia consider trading wine and oil with each other. Spain can gain from specialization and trade as long as it receives more than  BLANK?  of oil for each bottle of wine it exports to Tunisia. Similarly, Tunisia can gain from trade as long as it receives more than  BLANK?  of wine for each barrel of oil it exports to Spain.


First blank

-1 barrel

-1/10 barrel

-1/5 barrel

-5 barrels

-10 barrels


Second blank

-1 barrel

-1/10 barrel

-1/5 barrel

-5 barrels

-10 barrels






Based on your answer to the last question, which of the following prices of trade (that is, price of wine in terms of oil) would allow both Tunisia and Spain to gain from trade? Check all that apply.


-1 barrel of oil per bottle of wine

-7 barrels of oil per bottle of wine

-11 barrels of oil per bottle of wine

-6 barrels of oil per bottle of wine

Top Answer

Sign up to view the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question