Suppose that if the United States produced only oil, it could produce 25 million barrels; and if it produced only microchips, it could produce 20 million chips. Suppose that if Mexico produced only oil, it could produce 16 million barrels; and if it produced only microchips, it could produce 8 million chips. Which statement is then correct?
A) Mexico has a comparative advantage in producing both goods.
B) The United States has an absolute advantage over Mexico in producing both goods.
C) Mexico has an absolute advantage over the United States in producing both goods.
D) The United States has a comparative advantage in producing both goods.
Correct Answer:
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