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Assume Spain Determines That It Has a Comparative Advantage in Wool

Question 51

Multiple Choice

Assume Spain determines that it has a comparative advantage in wool and begins to export wool to Portugal. In turn, Portugal finds it has a comparative advantage in wine and begins to export wine to Spain. Who are the likely winners and losers in the short run as a result of this specialization?


A) everyone in both countries will gain from free trade.
B) the winners are producers of wool in Spain, producers of wine in Portugal, and consumers in both countries; the losers are producers of wine in Spain and producers of wool in Portugal.
C) the winners are consumers in both countries and producers in both countries; the losers are the workers in both countries.
D) the winners are producers of wool in Portugal, producers of wine in Spain, and consumers in both countries; the losers are producers of wine in Portugal and producers of wool in Spain.

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