The first example of comparative advantage appeared in a book that was published in 1817.This example showed that mutually beneficial trade between two countries (England and Portugal)was possible.The example assumed that two goods (wine and cloth)could be produced by both countries.Which of the following describes the conclusion of this example?
A)Portugal had a comparative advantage in wine and England had a comparative advantage in cloth.
B)Portugal had a comparative advantage in both wine and cloth,but its advantage in cloth was greater.
C)England had a comparative advantage in both wine and cloth,but its advantage in cloth was greater.
D)England had an absolute advantage in both wine and cloth,but a comparative advantage in wine.

Question

Quizplus · Accepted Answer

The example showed that Portugal had a comparative advantage in producing wine and England had a comparative advantage in producing cloth. This means that even though Portugal could produce both wine and cloth, it could produce wine at a lower opportunity cost compared to England, while England could produce cloth at a lower opportunity cost compared to Portugal. Therefore, both countries could benefit from trade by specializing in the production of the goods in which they had a comparative advantage and then trading with each other.

The First Example of Comparative Advantage Appeared in a Book