Spain and Germany can both produce fish and cars. Spain has a comparative advantage in cars, but Germany has an absolute advantage in cars. What would Germany import from Spain?
A) Nothing, because Germany has a comparative advantage in fish and an absolute advantage in cars.
B) Cars, because it is relatively cheaper for Spain to produce them.
C) Fish, because Germany can produce cars cheaper than Spain.
D) Both fish and cars, because Germany's absolute advantage in cars creates more income.

Question

Quizplus · Accepted Answer

Although Germany has an absolute advantage in producing cars, Spain has a comparative advantage in producing cars. This means that Spain can produce cars at a relatively lower opportunity cost compared to producing fish. Therefore, Germany would import cars from Spain as it would be relatively cheaper for Spain to produce them.

Spain and Germany Can Both Produce Fish and Cars