Specialisation and trade

Question 1

examples of comparative advantage

Answer 1

England and Portugal both benefit by specializing and trading according to their comparative advantages. In this case, Portugal was able to make wine at a low cost, while England was able to cheaply manufacture cloth.

Question 2

examples of a country having an absolute advantage

Answer 2

Italy can both produce automobiles, but Italy can produce sports cars of a higher quality at a faster rate with greater profit, then Italy is said to have an absolute advantage in that particular industry.