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.