Given two nations and two products,when each nation has an absolute advantage in making one product:
A)the nations should specialize and trade
B)the nations should not trade
C)the nations should not specialize
D)both nations have a comparative advantage
E)the other country also has an absolute advantage in making that same product

Question

Quizplus · Accepted Answer

If each nation has an absolute advantage in making one product, it means that one nation can produce one product more efficiently than the other, while the other nation can produce the other product more efficiently. If they specialize in producing the product in which they have an absolute advantage, they can increase their overall production and trade with each other. By trading, they can obtain the product that they are not efficient in producing and benefit from the gains of trade. This leads to a more efficient allocation of resources and a higher overall level of production for both nations.

Given Two Nations and Two Products,when Each Nation Has an Absolute