The opportunity cost of producing wine in Portugal is less than in Spain. From t

ID: 1148385 • Letter: T

Question

The opportunity cost of producing wine in Portugal is less than in Spain. From this we can conclude the following:

A. Spain has a comparative and absolute advantage in wine production over Portugal.

B. Portugal has a comparative advantage, but may or may not have an absolute advantage in wine production over Spain.

C. Portugal has an absolute advantage in wine production over Spain but not a comparative advantage.

D. Portugal has a comparative and absolute advantage in wine production over Spain.

E. Spain has a comparative advantage, but does not have an absolute advantage in wine production over Portugal.

Explanation / Answer

IN the statement only the details of the opportunity cost were mentioned but not the actual cost. Therefore, it is obvious that Portugal has a comparitive advantage but might or might not posses absolute advantage over Spain.

Therefore the option (B). Portugal has a comparative advantage, but may or may not have an absolute advantage in wine production over Spain is the answer for this question

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The opportunity cost of producing wine in Portugal is less than in Spain. From t

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