Suppose that Greece and Switzerland both produce oil and oli

Suppose that Greece and Switzerland both produce oil and olives. Greece\'s opportunity cost of producing a crate of olives is 5 barrels of ail production of olives and Switzerland has a comparative advantage in the production of oil Suppose that Greece and Switzerland consider trading olives and oil with each other. Greece can gain from specialization and trade as long as it receives more than 5 barrels of oil for each crate of olives it exports to Switzerland. Similarly, Switzerland can gain from trade as long as receives more than 1/ 10 crate ? of olives for each barrel of oil it exports to Greece. 12 b

Solution

Correct option: B. 9 barrels of oil per crate or olives.
Explanation: as per above answers we can see that Greece will trade where it will get 5 barrels of oil for one crate of olives and Switzerland will only trade where it has to give only upto 9 barrels of oil for one crate of olives (1/10 olives for 1 barrel of oil).

Note: option D could not be right option because it may be fair deal for Greece but not for Switzerland as it will only trade when it will have to give only 9 barrels of oil or less for one crate of olives.

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