Answer the question(s)below based on the information in the following table,where the numbers represent the number of labor hours it will take to produce a unit of the given good.
$$\begin{array} { | c | c | c | }
\hline & \text { Spain } & \text { France } \
\hline \text { Grapes } & 3 & 9 \
\hline \text { Textiles } & 1 & 2 \
\hline
\end{array}$$
-Refer to the table above.Once trade begins,a possible international price (i.e.terms of trade)for textiles in terms of grapes is

Question

Answer the question(s)below based on the information in the following table,where the numbers represent the number of labor hours it will take to produce a unit of the given good.
 $$\begin{array} { | c | c | c | } 
\hline & \text { Spain } & \text { France } \
\hline \text { Grapes } & 3 & 9 \
\hline \text { Textiles } & 1 & 2 \
\hline
\end{array}$$
-Refer to the table above.Once trade begins,a possible international price (i.e.terms of trade)for textiles in terms of grapes is

Quizplus · Accepted Answer

To determine the international price of textiles in terms of grapes, we need to find the opportunity cost of producing textiles in each country. In Spain, it takes 1 labor hour to produce a unit of textiles and 3 labor hours to produce a unit of grapes. Therefore, the opportunity cost of producing one unit of textiles in Spain is 3/1 or 3 units of grapes. In France, it takes 2 labor hours to produce a unit of textiles and 9 labor hours to produce a unit of grapes. The opportunity cost of producing one unit of textiles in France is 9/2 or 4.5 units of grapes. Based on this information, Spain has a lower opportunity cost for producing textiles and should specialize in textiles production while France should specialize in grape production. This would lead to a possible international price of textiles in terms of grapes of 2/5 (the reciprocal of Spain's opportunity cost).

Answer the Question(s)below Based on the Information in the Following