The United States and Canada trade hockey skates and apple pie. If the United States has an absolute and a comparative advantage at producing apple pie, then:

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Quizplus · Accepted Answer

If the United States has both an absolute and a comparative advantage in producing apple pie, it means they can produce apple pie more efficiently and at a lower opportunity cost than Canada. Therefore, for trade to be beneficial for both countries, Canada must have a comparative advantage in producing the other good, which is hockey skates. Comparative advantage drives trade because it allows each country to specialize in the production of goods for which they have the lowest opportunity cost, leading to more efficient global production and increased overall welfare. Absolute advantage is not necessary for beneficial trade; what matters is comparative advantage.

The United States and Canada Trade Hockey Skates and Apple