If Wendy can produce more of all goods than Tommy in an hour, then
A) Wendy has a comparative advantage in all goods.
B) Tommy has an absolute advantage in all goods.
C) Only Tommy but not Wendy can benefit from trade between the two of them.
D) Wendy does not need to trade with Tommy in order to achieve the gains from trade.
E) Wendy has an absolute advantage in all goods.

Question

Quizplus · Accepted Answer

Wendy having the ability to produce more of all goods than Tommy in an hour indicates that Wendy has an absolute advantage in all goods. Comparative advantage, on the other hand, involves being able to produce a good at a lower opportunity cost, which is not directly addressed by the information given.

If Wendy Can Produce More of All Goods Than Tommy