The opportunity cost of producing wine in Portugal is less t

The opportunity cost of producing wine in Portugal is less than in Spain. From this we can conclude the following:

A. Spain has a comparative and absolute advantage in wine production over Portugal.

B. Portugal has a comparative advantage, but may or may not have an absolute advantage in wine production over Spain.

C. Portugal has an absolute advantage in wine production over Spain but not a comparative advantage.

D. Portugal has a comparative and absolute advantage in wine production over Spain.

E. Spain has a comparative advantage, but does not have an absolute advantage in wine production over Portugal.

Solution

IN the statement only the details of the opportunity cost were mentioned but not the actual cost. Therefore, it is obvious that Portugal has a comparitive advantage but might or might not posses absolute advantage over Spain.

Therefore the option (B). Portugal has a comparative advantage, but may or may not have an absolute advantage in wine production over Spain is the answer for this question