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) England had an absolute advantage in both wine and cloth, but a comparative advantage in wine.
B) Portugal had a comparative advantage in both wine and cloth, but its advantage in cloth was greater.
C) Portugal had a comparative advantage in wine and England had a comparative advantage in cloth.
D) England had a comparative advantage in both wine and cloth, but its advantage in cloth was greater.
C
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If the cross-elasticity of demand for two goods is positive, this means that the goods are:
a. normal goods. b. inferior goods. c. substitutes. d. complements.