Suppose that France and Switzerland both produce rye and olives. France's opportunity cost of producing a crate of olives is 4 bushels of rye while Switzerland's opportunity cost of producing a crate of olives is 10 bushels of rye.
By comparing the opportunity cost of producing olives in the two countries, you can tell that ___ has a comparative advantage in the production of olives and ______ has a comparative advantage in the production of rye.
Suppose that France and Switzerland consider trading olives and rye with each other. France can gain from specialization and trade as long as it receives more than ______ of rye for each crate of olives it exports to Switzerland. Similarly, Switzerland can gain from trade as long as it receives more than _____ of olives for each bushel of rye it exports to France.
Based on your answer to the last question, which of the following prices of trade (that is, price of olives in terms of rye) would allow both Switzerland and France to gain from trade? Check all that apply.
1 bushel of rye per crate of olives
2 bushels of rye per crate of olives
8 bushels of rye per crate of olives
6 bushels of rye per crate of olives