France and Germany each produce both wine and beer. Their production possibilities are: France - 200 bottles of wine or 400 bottles of beer, and Germany 500 bottles of wine or 400 bottles of beer.

A. Which country has an absolute advantage in wine production?

B. Which country has an absolute advantage in beer production?

C. Which country has a comparative advantage in wine production?

D. Which country has a comparative advantage in beer production?

E. Propose a trade agreement between the two countries that each would likely accept rather than remain self-sufficient and provide justification for your answer.

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Comparative Advantage Analysis A Absolute Advantage in Wine Production France has an absolute advantage in wine production because it can produce more ... View the full answer