Why are French wines able to command a price premium in export markets?

Why are French wines able to command a price premium in export markets?

 

 

Answer:

According to law of comparative advantage, a country has comparative advantage in production of a good which it can produce at a lower opportunity cost. Trade will be beneficial if each country specializes in and exports that good in which it has comparative advantage.

France can produce wine at a lower opportunity cost than other countries can. So France has comparative advantage in wine and will specialize in and export wine. The benefit of lower opportunity cost will enable France to charge a higher price of its wine in export market.

Asked on February 15, 2018 in economics.
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