📚 Learning Guide
Comparative and Absolute Advantage
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If Country A has an absolute advantage in producing both cars and cocoa compared to Country B, then Country A should produce both goods and not engage in trade.

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Learning Path
Learning Path

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Choose the Best Answer

A

True

B

False

Understanding the Answer

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Answer

Having an absolute advantage means that Country A can produce more of both cars and cocoa than Country B using the same resources. However, this doesn't mean Country A should produce both goods by itself. Instead, Country A should focus on producing the good it makes most efficiently compared to the other good, while Country B should specialize in what it produces best. For example, if Country A is much better at making cars than cocoa, and Country B is better at cocoa production, they can trade to benefit both. By specializing and trading, both countries can end up with more goods than if they tried to produce everything themselves.

Detailed Explanation

Even if Country A is better at making both items, it can still benefit from trade. Other options are incorrect because This answer suggests that being better at everything means no trade is needed.

Key Concepts

Absolute Advantage
Comparative Advantage
Opportunity Cost
Topic

Comparative and Absolute Advantage

Difficulty

medium level question

Cognitive Level

understand

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