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

Even though Beta has an absolute advantage in both goods, trade can still be beneficial due to comparative advantage, which allows for more efficient allocation of resources and increases total output.

Assume That by Devoting All Its Resources to the Production