Assume that Germany and China can produce beer and cloth.If the
MPLc/MPLb for Germany is 2/5 and MPLc/MPLb for China is 1, then China
Should:
A)specialize in producing beer and export beer.
B)specialize in producing cloth and export cloth.
C)not specialize, because China will not benefit from it.
D)specialize in producing cloth and import cloth.

Question

Quizplus · Accepted Answer

To determine which country should specialize in which good, we need to compare their opportunity costs. The opportunity cost of producing one unit of cloth for Germany is 2/5 units of beer, while for China it is 1 unit of beer. This means that Germany has a comparative advantage in producing beer, while China has a comparative advantage in producing cloth. Therefore, China should specialize in producing cloth and export cloth.

Assume That Germany and China Can Produce Beer and Cloth