I dont see why the correct answer is C. From my calculation:
Germany has a lower opportunity cost to produce cheese (5/10) vs. Holland (4/6). What am I doing wrong?
The table below outlines the possible tradeoffs of producing beer and cheese for Germany and Holland.
Germany Holland Cheese Beer Cheese__Beer 0 10 0 6 5 0 4 0
Which of the following statements is most accurate?
A) Both countries would gain if Germany traded cheese for Holland’s beer. B) Germany would not gain from trade, because it has an absolute advantage in the production of both goods. C) Both countries would gain if Germany traded beer for Holland’s cheese.
Your answer: A was incorrect. The correct answer was C) Both countries would gain if Germany traded beer for Holland’s cheese.