Two neighbors, countries A and B, produce books and biankets, among other goods

Question

Two neighbors, countries A and B, produce books and biankets, among other goods and services. However, Country A produces more in both countries, these industries individually employ 30 peroent of the population. She condludes that country A has an absolute Maya's condlusion is flawed because of both goods than country B. A student of economics, Maya, also notes that advantage in the production of books and biankets over country B A, she assures that both courtries have linear production possible" fort B. she assumes that country A has more liberal trade poicies than oortry B C. she assumes that country A's population is no larger than country Bs. D. she assumes that oountry Adoes not face roreasng margnal opponnty oost whe' sh ing resoures 'on one indaty to the deer OE. she assumes that the productivity of workers in both oountres is identical.

Explanation / Answer

Correct option is (C).

A country has absolute advantage in producing a good if it can produce more units of that good using the same resources as the other country uses. In this case Maya assumes that both countries have same population, therefore number of labor hours (= 30% x Population) is the same for both countries, which is flawed.

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