Question

suppose that poland and liechtenstein both produce ale and broccoli. poland's opportunity cost of producing a bushel of broccoli is 5 kegs of ale while liechtenstein's opportunity cost of producing a bushel of broccoli is 11 kegs of ale. 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 ale. suppose that poland and liechtenstein consider trading broccoli and ale with each other. poland can gain from specialization and trade as long as it receives more than of ale for each bushel of broccoli it

Answer 1

Poland has a comparative advantage in the production of broccoli and Liechtenstein has a comparative advantage in the production of ale. Poland can gain from specialization and trade by receiving more than 5 kegs of ale for each bushel of broccoli it trades.

Step-by-step explanation:

Comparative advantage is determined by comparing the opportunity costs of producing different goods in two countries. In this case, Poland has a comparative advantage in the production of broccoli because its opportunity cost of producing a bushel of broccoli is lower than Liechtenstein's. Liechtenstein has a comparative advantage in the production of ale because its opportunity cost of producing a bushel of broccoli is higher than Poland's.

By specializing in the production of goods in which they have a comparative advantage, both countries can benefit from trade. Poland should aim to receive more than 5 kegs of ale for each bushel of broccoli it trades, as that is the opportunity cost of producing a bushel of broccoli in Poland. This way, Poland can gain from specialization and trade.