Two persons each produce two identical goods. Which of the following is true about their absolute and comparative advantages in the production of these two goods?
A) One person can have an absolute advantage in both goods but not a comparative advantage in both goods.
B) One person can have a comparative advantage in both goods but not an absolute advantage in both goods.
C) One person can have neither an absolute nor a comparative advantage in either good.
D) Both persons can always have both an absolute and comparative advantage in both goods.

Question

Quizplus · Accepted Answer

One person can have an absolute advantage in both goods if they can produce more of both goods than the other person. However, comparative advantage is based on opportunity cost, and one person cannot have a comparative advantage in both goods because it would mean the other person has a lower opportunity cost in neither good.

Two Persons Each Produce Two Identical Goods