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Suppose That Spain Has a Comparative Advantage in Hats and Portugal

question 31

Multiple Choice

Suppose that Spain has a comparative advantage in hats and Portugal has a comparative advantage in doormats. Under a system of free trade, each country specialises and then trades with the other. If the price starts at four hats per doormat, and then increases to five hats per doormat, then:


Definitions:

Ectoderm

The outermost layer of cells or tissue of an embryo in early development, giving rise to the skin and nervous system.

Placenta

An organ that develops in the uterus during pregnancy, providing oxygen and nutrients to the growing baby while removing waste.

Yolk

Nutritious material in many animal eggs.

Proteins

Large biomolecules consisting of one or more long chains of amino acid residues, vital for the structure, function, and regulation of the body's cells, tissues, and organs.

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