Denmark Has a Comparative Advantage in Cheese Production, and Holland

question 64

Multiple Choice

Denmark has a comparative advantage in cheese production, and Holland has a comparative advantage in beer production. The two countries initially trade cheese and beer based on their comparative advantages, but the government of Denmark later closes the border to trade with Holland. What is the likely impact of this trade restriction?

• A) Danish cheese consumers are worse off, and beer producers in Holland are better off.
• B) Cheese consumers in both countries are worse off.
• C) Beer consumers in Holland are worse off, and cheese producers in Denmark are better off.
• D) Beer consumers in Holland are better off, and cheese producers in Holland are better off.

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