Question

Suppose that Greece and Germany both produce oil and stained glass. Greece's opportunity cost of producing a pane of stained glass is 4 barrels of oil while Germany'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 Greece and Germany consider trading stained glass and oil with each other. Greece can gain from specialization and trade as long as it receives more than of oil for each pane of stained glass it exports to Germany. Similarly, Germany can gain from trade as long as it receives more than of stained glass for each barrel of oil it exports to Greece. 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 Germany and Greece to gain from trade

Answer 1

an average 7 barrels to trade

Step-by-step explanation: