Suppose that Portugal and Germany both produce beer and stained glass. Portugal's opportunity cost of producing a pane of stained glass is 4 barrels of beer while Germany's opportunity cost of producing a pane of stained glass is 10 barrels of beer.
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 beer.
Suppose that Portugal and Germany consider trading stained glass and beer with each other. Portugal can gain from specialization and trade as long as it receives more than ___ of beer for each pane of stained glass it exports to Germany. Similarly, Germany can gain from trade as long as it receives more than ___ of stained glass for each barrel of beer it exports to Portugal.
Based on your answer to the last question, which of the following prices of trade (that is, price of stained glass in terms of beer) would allow both Germany and Portugal to gain from trade?
a. 8 barrels of beer per pane of stained glass.
b. 6 barrels of beer per pane of stained glass.
c. 2 barrels of beer per pane of stained glass.
d. 18 barrels of beer per pane of stained glass.