Economics: The Basics 1st Edition by Mike Mandel

Exercise 4

Suppose that because of climate or some other reason, country A's wheat farmers have higher productivity than country B's wheat farmers. That is, on the same size farm, country A can grow twice as much wheat as country B, with the same amount of labor.
a) Is this an example of absolute advantage or comparative advantage? Explain.
b) Does this mean country A will necessarily export wheat to country B? Explain.