Business, 22.02.2021 19:10 inucornspineapple

Suppose that Portugal and Germany both produce oil and cheese. Portugal's opportunity cost of producing a pound of cheese is 3 barrels of oil while Germany's opportunity cost of producing a pound of cheese is 11 barrels of oil. By comparing the opportunity cost of producing cheese in the two countries, you can tell that has a comparative advantage in the production of cheese and has a comparative advantage in the production of oil.
Suppose that Portugal and Germany consider trading cheese and oil with each other. Portugal can gain from specialization and trade as long as it receives more than of oil for each pound of cheese it exports to Germany. Similarly, Germany can gain from trade as long as it receives more than of cheese for each barrel of oil it exports to Portugal.
Based on your answer to the last question, which of the following prices of trade (that is, price of cheese in terms of oil) would allow both Germany and Portugal to gain from trade?
a. 7 barrels of oil per pound of cheese
b. 18 barrels of oil per pound of cheese
c. 2 barrels of oil per pound of cheese
d. 5 barrels of oil per pound of cheese

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Suppose that Portugal and Germany both produce oil and cheese. Portugal's opportunity cost of produc...

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