Question

4 of 10 (10 complete) This Quiz: 10 pts posible Suppose that the United States and Italy both produce wine and shoes. In the United States, wine seis for $10 a bottle and shoes sell for $40 a pair in Italy, wine selle for 15 euros a bottle and shoes sell for 20 euros a pair Given this information, trade will flow in both directions if the price of a dollar is between A 2.0 and 3.0 euros OB. 1.5 and 2.5 euros. OC. 67 and 2 euros. OD. 5 and 75 euro

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Answer 1

Trade will happen in both direction if United States purchase one product from Italy and vice versa. It means that Italy must get one product among wine and shoes cheaper in United States than they produce and same for United States.

If the price of dollar is between 0.5 and 0.75 euros, Italy will purchase wine from United States (10 euros is 20 - 26.67 dollar) because it will be cheaper for Itlay to purchase wine from them. United States will purchase shoes from Italy (40 dollar is 20 - 30 euro)

Option D is correct.