Suppose Portugal has 700 workers and 26,000 units of
Capital, and France has 18,000 workers and 700 units of
Capital.Technology is identical in both countries.Assume
That wine is the capitalintensive good and cloth is the
Laborintensive good.Which of the following statements is
CORRECT?
A)Portugal will export wine and import cloth.
B)France will export wine and import cloth.
C)There is no basis for trade between France and Portugal.
D)Portugal will export cloth and import wine.

Question

Suppose Portugal has 700 workers and 26,000 units of
Capital, and France has 18,000 workers and 700 units of
Capital.Technology is identical in both countries.Assume
That wine is the capital­intensive good and cloth is the
Labor­intensive good.Which of the following statements is
CORRECT?
A)Portugal will export wine and import cloth.
B)France will export wine and import cloth.
C)There is no basis for trade between France and Portugal.
D)Portugal will export cloth and import wine.

Quizplus · Accepted Answer

Portugal has a comparative advantage in wine production (capital-intensive) due to its abundance of capital, while France has a comparative advantage in cloth production (labor-intensive) due to its abundance of labor.

Suppose Portugal Has 700 Workers and 26,000 Units of