Suppose That Greece and Portugal Are Both Engaged in the Production

question 21

Multiple Choice

Suppose that Greece and Portugal are both engaged in the production of grapes and figs, and that Greece has an absolute advantage in the production of both goods. If Portugal has a lower opportunity cost for producing figs, then

• A) Portugal has a comparative advantage in the production of figs, but it is outweighed by Portugal's absolute advantage in fig production.
• B) Greece has a comparative advantage in the production of both goods.
• C) Portugal has a comparative advantage in fig production, but there will be no gains from specialization and trade.
• D) Portugal has a comparative advantage in the production of figs, and specialization and trade between the two countries can be mutually beneficial.

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Definitions:

Hindsight Bias

The tendency to believe, after an event has occurred, that one would have predicted or expected the outcome, often leading to an oversimplification of cause and effect.

Psychoanalytic Theory

A theory of psychology and psychotherapy developed by Sigmund Freud that emphasizes unconscious motives and conflicts.

Personality

This refers to individual differences in characteristic patterns of thinking, feeling, and behaving.

Projective Tests

Psychological assessment tools designed to reveal hidden emotions and internal conflicts through a subject's responses to ambiguous stimuli.