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Brums [2.3K]
3 years ago
9

Assume that Germany and China can produce beer and cloth. If the MPLc/MPLb for Germany is 2/5 and the MPLc/MPLb for China is 1,

then Germany should: _______
Business
1 answer:
elena55 [62]3 years ago
6 0

Answer: c. specialize in producing beer and export beer.

Explanation:

As per the Theory of Competitive Advantage posited by David Ricardo, a country should specialize in the good that it has a competitive advantage in. A country has a competitive advantage if it incurs a less opportunity cost in producing the good.

Opportunity cost of producing beer for Germany = MPLc/MPLb = 2/5

Opportunity cost of producing beer for China = MPLc/MPLb = 1

Germany has a lower cost of producing beer so they should specialize in this and export it.

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