Consider a world with two countries (call them Canada and America). Currently, both countries prohibit foreign trade, but they are contemplating a free trade deal. Before trade, both countries produce - and consume - two goods (call them lamb and wheat). The maximum amount of lamb Canada can produce is 10, while the maximum amount of wheat is 30. For America, the maximum amount of lamb is 120, while the maximum amount of wheat is 400. Before the trade, Canada consumes 5 units of lamb and 15 units of wheat. For simplicity, America has ten times the resources of Canada. Both countries have linear production possibility curves. Further, both goods are normal in both countries.
With regards to the production of lamb, Canada has:
a) A comparative, but not an absolute, advantage
b) A comparative and an absolute advantage
c) An absolute, but not a comparative advantage
d) Neither an absolute nor a comparative advantage
With the production of wheat, Canada has:
a) A comparative, but not an absolute, advantage
b) A comparative and an absolute advantage
c) An absolute, but not a comparative advantage
d) Neither an absolute nor a comparative advantage
With regards to the production of lamb, Canada has:
a) A comparative, but not an absolute, advantage
b) A comparative and an absolute advantage
c) An absolute, but not a comparative advantage
d) Neither an absolute nor a comparative advantage
With the production of wheat, Canada has:
a) A comparative, but not an absolute, advantage
b) A comparative and an absolute advantage
c) An absolute, but not a comparative advantage
d) Neither an absolute nor a comparative advantage