If France is better than Latvia at producing wine,but Latvia is better than France at producing lumber,what should happen
A)Latvia should sell lumber to France, and should buy French wine.
B)Latvia should impose a tariff on French wine in order to protect jobs in the Latvian lumber industry.
C)Latvia should subsidize its wine industry so that it can compete with French wine.
D)Latvia should put a quota on the amount of French wine imported.

Question

Quizplus · Accepted Answer

Latvia should specialize in producing lumber and sell it to France, while France should specialize in producing wine and sell it to Latvia. This way, both countries can benefit from each other's comparative advantage, leading to increased trade and economic growth. It would not be wise for Latvia to impose a tariff on French wine, as this would only hurt Latvian consumers who enjoy French wine and could lead to a trade war between the two countries. Subsidizing the wine industry would be a waste of resources and likely prove to be unsustainable in the long run. A quota on French wine could limit consumer choice and hurt trade relations between the two countries.

If France Is Better Than Latvia at Producing Wine,but Latvia