Suppose that the United States and Italy are considering trade in two products: grain and oranges.Suppose that before trade,the United States produces 800 million bushels of grain and 200 million bushels of oranges.At the same time,Italy produces 200 million bushels of grain and 100 million bushels of oranges.Which of the following statements regarding absolute advantage is TRUE?

Question

Quizplus · Accepted Answer

Absolute advantage is the ability of one country to produce a good or service with a lower resource cost than another country. In this scenario, the United States can produce more grain and oranges than Italy before any trade occurs. Therefore, the United States has an absolute advantage in producing both goods.

Suppose That the United States and Italy Are Considering Trade