(Solved): Suppose that France and Switzerland both produce jeans and stained glass. France's opportunity cost ...

Suppose that France and Switzerland both produce jeans and stained glass. France's opportunity cost of producing a pane of stained glass is 5 pairs of jeans while Switzerland's opportunity cost of producing a pane of stained glass is 10 pairs of jeans. 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 jeans. Suppose that France and Switzerland consider trading stained glass and jeans with each other. France can gain from specialization and trade as long as it receives more than

of jeans for each pane of stained glass it exports to Switzerland. Similarly, Switzerland can gain from trade as long as it receives more than

of stained glass for each pair of jeans it exports to France. Based on your answer to the last question, which of the following terms of trade (that is, price of stained glass in terms of jeans) would allow both Switzerland and France to gain from trade? Check all that apply. 6 pairs of jeans per pane of stained glass 9 pairs of jeans per pane of stained glass 2 pairs of jeans per pane of stained glass 1 pair of jeans per pane of stained glass