Sweaters are produced using wool and labour. In Montega, a sweater can be produced with three skeins of wool and three hours of labour time. In Xena, a sweater can be produced with three skeins of wool and two hours of labour time. Which of the following is true?
A) Xena has both a comparative and an absolute advantage in the production of sweaters.
B) Montega has an absolute advantage in the production of sweaters but, from this information, it cannot be determined if Montega has a comparative advantage in the production of sweaters.
C) Xena has an absolute advantage in the production of sweaters but, from this information, it cannot be determined if Xena has a comparative advantage in the production of sweaters.
D) Montega has both a comparative and an absolute advantage in the production of sweaters.
Correct Answer:
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