If Wendy can produce more of all goods than Tommy in an hour,then
A) Wendy has an absolute advantage in all goods.
B) Wendy does not need to trade with Tommy in order to achieve the gains from trade.
C) Wendy has a comparative advantage in all goods.
D) Tommy has an absolute advantage in all goods.
E) Only Tommy but not Wendy can benefit from trade between the two of them.

Question

Quizplus · Accepted Answer

Wendy having the ability to produce more of all goods than Tommy in an hour means she has an absolute advantage in producing those goods. Comparative advantage, on the other hand, is about who can produce goods at a lower opportunity cost, not necessarily more of them. Absolute advantage refers to the ability to produce more of a good or service with the same amount of resources.

If Wendy Can Produce More of All Goods Than Tommy