Suppose that Portugal and Switzerland both produce beer and shoes

Economics Dec 17, 2020

Suppose that Portugal and Switzerland both produce beer and shoes. Portugal's opportunity cost of producing a pair of shoes is 5 barrels of beer while Switzerland's opportunity cost of producing a pair of shoes is 10 barrels of beer.

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Portugal has a lower opportunity cost of producing shoes so Portugal has a comparative advantage in shoes and Switzerland has a comparative advantage in beer.

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