QUESTION 10 3 points Save Answer COMPARATIVE AVANTAGE QUESTION Assume each natio

Question

QUESTION 10 3 points Save Answer COMPARATIVE AVANTAGE QUESTION Assume each nation is approxiomately using the same amount of resouces. England has the ability to produce 600 units of wool and 200 units of wine. Portugal has the ability to produce 500 units of wool and 250 units of wine. Base on this information the tradeoff ratios of wine to wool England and Portugal are respectivity Which nation should specialize in producing wine since is has a lower opportunity cost.? England: 3 to 1 Portugal: 2 to 1 England England: 1 to 3 Portugal: 1 to 2 England England: 3 to 1 Portugal: 2 to 1 Portugal England: 1 to 3 Portugal: 1 to 2 Portugal

Explanation / Answer

For England

Trade off ratio = total unit of wine/ total unit of wool

= 200/600 = 1/3, or 1 to 3.

For Portugal

Trade off ratio = total unit of wine/ total unit of wool

= 250/ 500 = 1/2, or 1 to 2.

Now, since we can see that opportunity cost for producing wine is more in england, because for producing 1 unit of wine, it can produce 3 unit of wool.

Thus Portugal is specialized in producing wine.

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