Answer :
Hungary has a comparative advantage in the production of wine. (C. Hungary has)
Comparative advantage refers to the ability of a country to produce a particular good or service at a lower opportunity cost than another country. It is determined by comparing the opportunity costs of producing different goods between countries.
In this case, Hungary's opportunity cost of producing a bottle of wine is 3 pounds of cheese, while Spain's opportunity cost is 2 pounds of cheese. Since Hungary has a higher opportunity cost in terms of cheese production, it means that Hungary gives up more cheese to produce a bottle of wine compared to Spain.
Therefore, Hungary has a comparative advantage in the production of wine because it has a lower opportunity cost in terms of cheese production. This implies that Hungary can produce wine more efficiently and at a lower cost compared to Spain.
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Suppose that Hungary and Spain both produce cheese and wine. Hungary's opportunity cost of producing a bottle of wine is 3 pounds of cheese. That is, Hungary forgoes the production of 3 pounds of cheese when it produces a bottle of wine. Spain's opportunity cost of producing a bottle of wine is 2 pounds of cheese. _____________(A. neither Hungary or Spain , B. both Hungary and Spain , C. Hungary has, D. Spain has) a comparative advantage in the production of wine.
