Refer to the data available in Table 1. Assume both countries have equal quantities of resources. Assume they can each only produce cars and bananas. Table 1 shows the quantities of each product that each country could possibly produce using the resources available. Table 1: Production Possibilities for Country A and Country B
[table]
| Country A | Country B
Maximum possible production of cars, assuming all resources are used for car production. | 1 million | 5 million Maximum possible production of bananas, assuming all resources are used for banana production. | 20 million | 35 million
[/table] Which country has an absolute advantage in producing both products?

Question

BlackTom AI · Accepted Answer

The question asks which country has an absolute advantage in producing both cars and bananas, given the production possibilities.
Option a: Neither. This would be claiming that neither country has an edge in either good. However, looking at the table, Country B can produce more cars (5 million vs 1 million) and more bananas (35 million vs 20 million) than Country A, so this option is incorrect.
Option b: Country A because it can produce bananas at a lower opportunity cost than Country B. This statement confuses absolute advantage with comparative advantage. The question is about absolute advantage (output levels given full resource use), not opportunity costs. Country A does not produce more bananas than Country B, so this is incorrect.
Option c: Both. This would assert that both countries have an absolute advantage in both goods. The data show Country B dominates in both categories, so this cannot be true. Therefore this option is incorrect.
Option d: Country B. This is correct because Country B has higher maximum production for both goods: 5 million cars vs 1 million for Country A, and 35 million bananas vs 20 million for Country A. Absolute advantage means being able to produce a larger quantity with the same resources, and Country B satisfies that for both products.
In summary, only Country B can produce more of both cars and bananas given the same resources, so it holds the absolute advantage in producing both products.

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