Suppose that the United States and Italy are considering trade in two products: grain and oranges. The United States can produce 800 million bushels of grain or 200 million bushels of oranges, while Italy can produce 200 million bushels of grain or 100 million bushels of oranges. Which statement regarding absolute advantage is true?
A) The United States has an absolute advantage in producing both grain and oranges.
B) Italy has an absolute advantage in producing both grain and oranges.
C) The United States has an absolute advantage in producing grain only.
D) Italy has an absolute advantage in producing oranges only.
Correct Answer:
Verified
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