Assume the following conditions: In the United States it takes 5 units of resources to produce a ton of potatoes and 10 to produce a ton of coal.In Canada it takes 6 units of resources to produce a ton of potatoes and 9 to produce a ton of coal.According to the theory of absolute advantage, ________.
A)the United States should export potatoes to Canada and import coal from Canada
B)the United States should export coal to Canada and import potatoes from Canada
C)the United States should import both potatoes and coal from Canada, while concentrating on production of more valuable goods
D)there would be no basis for trade

Question

Quizplus · Accepted Answer

The United States has an absolute advantage in producing potatoes, as it takes fewer resources to produce a ton of potatoes in the United States than in Canada. Canada has an absolute advantage in producing coal, as it takes fewer resources to produce a ton of coal in Canada than in the United States. Therefore, according to the theory of absolute advantage, the United States should export potatoes to Canada and import coal from Canada.

Assume the Following Conditions: in the United States It Takes