The price of trade
Suppose that Poland and Liechtenstein both produce beets and broccoli. Poland's opportunity cost of producing a bushel of broccoli is 5 bushels of beets while Liechtenstein's opportunity cost of producing a bushel of broccoli is 11 bushels of beets.
By comparing the opportunity cost of producing broccoli in the two countries, you can tell that - has a comparative advantage in the production of broccoli and ______ has a comparative advantage in the production of beets.
Suppose that Poland and Liechtenstein consider trading broccoli and beets with each other. Poland can gain from specialization and trade as long as it receives more than ______of beets for each bushel of broccoli it exports to Liechtenstein. Similarly, Liechtenstein can gain from trade as long as it receives more than ________of broccoli for each bushel of beets it exports to Poland.
Based on your answer to the last question, which of the following prices of trade (that is, price of broccoli in terms of beets) would allow both Liechtenstein and Poland to gain from trade?
a. 10 bushels of beets per bushel of broccoli
b. 15 bushels of beets per bushel of broccoli
c. 3 bushels of beets per bushel of broccoli
d. 1 bushel of beets per bushel of broccoli