Portugal specializes in the production of wine, and the United Kingdom specializes in the production of cheese. If the terms of trade for cheese is one bottle of wine, then we know that the opportunity cost of producing cheese is _____ than one bottle of wine in Portugal, and the opportunity cost of producing cheese is _____ than one bottle of wine in the UK.

Question

Quizplus · Accepted Answer

For Portugal to trade wine for cheese, the opportunity cost of producing cheese domestically must be greater than one bottle of wine, making it cheaper to produce wine and trade it for cheese. Conversely, for the UK, the opportunity cost of producing cheese must be less than one bottle of wine, making it beneficial for the UK to produce cheese and trade it for wine.

Portugal Specializes in the Production of Wine, and the United