Assume that by devoting all its resources to the production of X, nation Alpha can produce 20 units
of X. By devoting all its resources to Y, Alpha can produce 30Y. Comparable ﬁgures for nation Beta
are 60X and 40Y. There is no basis for trade between Alpha and Beta, because Beta has an
absolute advantage in the production of both goods.

Question

Quizplus · Accepted Answer

While it is true that nation Beta has an absolute advantage in the production of both goods, there is still potential for trade between the two nations based on comparative advantage. It is possible that nation Alpha has a lower opportunity cost for producing one of the goods, in which case they should specialize in the production of that good and trade with nation Beta for the other good.

Assume That by Devoting All Its Resources to the Production