Question

The table below shows how much cheese and how much wine an hour of labor produces in Italy and in Greece.

	Cheese (kg)	Wine (liters)
Italy	2	3.4
Greece	1.6	2.4

In the scenario above, Greece has a comparative advantage in producing:

	Cheese
	Neither good
	Wine
	Both goods

In the scenario above, can Italy benefit from trade with Greece?

	Yes, if Italy exports both goods to Greece.
	Yes, if Italy exports wine and imports cheese.
	Yes, if Italy exports cheese and imports wine.
	No, because Italy is more productive in both goods.
	No, because Italy has a comparative advantage in both goods.

Answer 1

Answer
Comparative advantage depends on the opportunity cost of the good
Opportunity cost of a good=Maximum production of other good /maximum production of the good
Opportunity cost of Cheese for Italy =3.4/2=1.7
The opportunity cost of Cheese for Greece =2.4/1.6=1.5
the opportunity cost of Cheese is lower for Greece. it means Greece has a comparative advantage in the Cheese and Italy in wine. it means Greece will export Cheese and Italy wine to benefit from trade.
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Q1
Answer
Option 1
Cheese

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Q2
Answer
Option 2
Yes, if Italy exports wine and imports cheese.
Italy has a comparative advantage in wine so it will report wine and import cheese.