Table 3-35
-Refer to Table 3-35. At which of the following prices, if any, could both Denmark and Finland gain from trade?
A)2/3 pounds of ham per dozen eggs.
B)1 pound of ham per dozen eggs.
C)1.4 pounds of ham per dozen eggs.
D)None of the above are correct.

Question

Table 3-35 
-Refer to Table 3-35. At which of the following prices, if any, could both Denmark and Finland gain from trade?
A)2/3 pounds of ham per dozen eggs. 
B)1 pound of ham per dozen eggs. 
C)1.4 pounds of ham per dozen eggs. 
D)None of the above are correct.

Quizplus · Accepted Answer

At a price of 1.4 pounds of ham per dozen eggs, Denmark has a comparative advantage in producing ham, while Finland has a comparative advantage in producing eggs. Both countries can specialize in the production of the good in which they have a comparative advantage and then trade with each other. Denmark can trade 2/3 pounds of ham for 1 dozen eggs, and Finland can trade 1 dozen eggs for 1.4 pounds of ham. This results in both countries being better off than if they did not trade. At the other two prices, either Denmark or Finland would have to give up too much of their own product to make the trade beneficial.

Table 3-35 -Refer to Table 3-35. at Which of the Following Prices