Suppose That Spain Is Currently Producing 90 Units of Wine

question 78

Multiple Choice

Suppose that Spain is currently producing 90 units of wine and 10 units of cheese, but to produce 10 more units of cheese it must sacrifice 30 units of wine. Further, suppose that Portugal produces 45 units of wine and 45 units of cheese, but to produce 10 more units of cheese it must sacrifice only 10 units of wine. It can be concluded that

• A)Portugal has an absolute advantage in both wine and cheese production.
• B)more information is needed to conclude anything about comparative advantage in either country.
• C)Portugal has an absolute advantage in wine production and Spain has an absolute advantage in cheese production.
• D)Spain has an absolute advantage in both wine and cheese production.
• E)Spain has a comparative advantage in the production of wine and Portugal has a comparative advantage in the production of cheese.

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Definitions:

Covalent Compound

A compound in which atoms are held together by covalent bonds; covalent compounds consist of molecules. Compare with ionic compound.

Methane

A colorless, odorless gas, CH4, that is the simplest alkane and a major component of natural gas, contributing to greenhouse gas emissions.

Potassium Chloride

A metal halide salt composed of potassium and chlorine, used in various applications including as a fertilizer, in medicine, and in food processing.

Lithium Bromide

A chemical compound used mainly in air conditioning systems as a desiccant due to its hygroscopic nature and in some pharmaceuticals; its formula is LiBr.