Ricardian Model Graded Assignment | Back to Assignment Due Sunday 01 28.18 at 11:45 PM Attempts:454 1. Terms of trade Suppose that France and Switzerland both produce rye and olives. France\'s opportunity cost of producing Kecp the Highest: 45/9 AaAa crate af olives is 3 pounds of rye, while Switzerland\'s opportunity cost of producing a crate of olives is 6 pounds of rye By comparing the opportunity costs of producing olives in the two countries, you can determine that advantage in the production of rye. France has a comparative advantage in the production of olives and Switzerland has a comparative Suppose that France and Switzerland consider trading olives and rye with each other. France can gain from specialization and trade as long as it receives more than3 pounds of rye for each crate of olives it exports to Switzerland. Similarly, Switzerland can gain from trade as long as it receives more than 1/6 erate of olives for each pound of rye it exports to France. Based on your answer to the last question, which of the following terms of trade (meaning the price of olives in terms of rye) would allow both Switzerland and France to gain from trade? Check all that apply 1 pound of rye per crate of olives 7pounds of rye per crate of olives 4 pounds of rye S pounds of rye per crate of olives per crate of olives Qt44 3.16 e 2004-2016 AGila. Aa rigtes reserved ade It Ne Save & Ca ntinue Continua withaut aving Copyright Notices Security Notice
All your answers are correct.
Your answer in the last part is also right. Anything more than 3 pounds of rye per crate of olive is beneficial for France and anything less than 6 pounds of rye for a crate of olive is beneficial for Switzerland.
Just take it simple, France is going to benefit if it receives anything more than 3 pounds of rye(for producing 1 crate of olive they are giving up 3 pounds of rye if they get less than 3 pounds of rye they will not trade). Switzerland is benefiting as long as they are giving anything less than 6 pounds of Rye for a crate of olive (if they have to give more than 6 pounds and receive just one crate of olives they are disadvantaged, as they can themselves produce 6 pounds of rye by giving up one crate of olive.)
Homework Sourse
