Posted by Ash on .
In France each unit of labour can produce 3 bottles of wine or 2 shirts. In Portugal each unit of labour can produce 2 bottles of wine or 1 shirt. Which country has a comparative advantage in producing wine?
It would seem that France has the advantage.
No its Portugal. The opportunity cost of producing 6 bottles of wine in France is 4 shirts, while the cost for 6 bottles in Portugal is only 3 shirts.
(France has the "absolute" advantage in that each unit of labor is more productive.)