Use the accompanying table to answer the following questions:
Table 3-6

-Refer to Table 3-6.If England and Spain trade based on the principle of comparative advantage,England will import
A)bread and Spain will import cheese.
B)bread and Spain will import bread.
C)cheese and Spain will import bread.
D)cheese and Spain will import cheese.

Question

Use the accompanying table to answer the following questions:
Table 3-6
 
-Refer to Table 3-6.If England and Spain trade based on the principle of comparative advantage,England will import
A)bread and Spain will import cheese. 
B)bread and Spain will import bread. 
C)cheese and Spain will import bread. 
D)cheese and Spain will import cheese.

Quizplus · Accepted Answer

According to the principle of comparative advantage, a country should specialize in producing and exporting goods that it can produce at a lower opportunity cost than other countries, and import goods that it cannot produce as efficiently. From the table, it can be seen that England has a comparative advantage in producing bread (1 unit of bread costs 1/2 unit of cheese) while Spain has a comparative advantage in producing cheese (1 unit of cheese costs 1/4 unit of bread). Therefore, England should export bread to Spain and import cheese from Spain, while Spain should export cheese to England and import bread from England. Therefore, England will import cheese and Spain will import bread.

Use the Accompanying Table to Answer the Following Questions