Table 3-6

-Refer to Table 3-5.If England and Spain trade based on the principle of comparative advantage,which country will export or import each product?

Question

Table 3-6
 
-Refer to Table 3-5.If England and Spain trade based on the principle of comparative advantage,which country will export or import each product?

Quizplus · Accepted Answer

According to the principle of comparative advantage, each country should specialize in producing the good in which it has a lower opportunity cost of production and trade with another country. Based on the data in Table 3-5, England has a lower opportunity cost in producing bread than in producing cheese, while Spain has a lower opportunity cost in producing cheese than in producing bread. Therefore, England should specialize in producing bread and Spain should specialize in producing cheese. As a result, England will import cheese from Spain, and Spain will import bread from England.

Table 3-6 -Refer to Table 3-5.If England and Spain Trade Based on Spain