Assume that Germany and China can produce beer and cloth.If the
MPLc/MPLb for Germany is 2/5 and MPLc/MPLb for China is 1, then
Germany should:
A)specialize in producing beer and export beer.
B)specialize in producing cloth and export cloth.
C)not specialize, because Germany will not benefit from it.
D)specialize in producing cloth and import cloth.

Question

Quizplus · Accepted Answer

Germany has a comparative advantage in producing beer because its MPLb/MPLc ratio is higher than China's. Therefore, Germany should specialize in producing beer and export it to China or other countries. This would increase Germany's overall production and income, while China can specialize in producing cloth and export it to Germany or other countries where there is a demand for it.

Assume That Germany and China Can Produce Beer and Cloth