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July 26, 2014

Homework Help: econ

Posted by Ash on Tuesday, May 22, 2007 at 9:34pm.

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.)

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