When Mik has an absolute advantage in the production of two goods over Tommy,Mik
A) is less productive than Tommy.
B) is better off if he does not engage in specialization and trade with Tommy.
C) is more productive in producing both goods than Tommy.
D) always has a comparative advantage over Tommy in the production of both goods.
E) cannot gain from trade with Tommy.

Question

Quizplus · Accepted Answer

When Mik has an absolute advantage in the production of two goods over Tommy, it means that Mik can produce both the goods with fewer resources than Tommy. Therefore, Mik is more productive in producing both the goods than Tommy. Since Mik can produce both goods more efficiently than Tommy, Mik can specialize in producing the good in which he has the greatest absolute advantage, and then trade with Tommy for the other good. This would result in both Mik and Tommy being better off than if they were to produce both goods on their own without specialization and trade.

When Mik Has an Absolute Advantage in the Production of Two