Assume that Germany and China can produce beer and cloth. If the MPL_c/MPL_b for Germany is 2/5 and MPL_c/MPL_b 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

The MPL ratio for Germany and China shows that Germany has a comparative advantage in producing beer and China has a comparative advantage in producing cloth. Therefore, China should specialize in producing cloth and export cloth to take advantage of its comparative advantage.

Assume That Germany and China Can Produce Beer and Cloth