Question

identify which country has an absolute advantage in production of cookies and which has the absolute advantage in production of milk

Answer 1

a) Question Completion:

INPUT HOURS OF LABOR

Country   Cookies      Milk

Atlantis       2 hours   1 hour

Neverland  4 hours   1 hour

Answer:

1. Atlantis has the absolute advantage in the production of cookies.

2. No country has the absolute advantage in the production of milk.

Explanation:

Absolute advantage refers to superior production capability.  It is determined when a country, for example, has the ability to produce a particular good or service at lower cost or more efficiently (i.e. with less resources) than the other country.  In the scenario above, Atlantis has an absolute advantage in the production of cookies because it can produce the same quantity of cookies using 2 labor hours that Neverland can produce using 4 labor hours.  But for the production of milk, Atlantis and Neverland share the same comparative advantage less they can use less labor hours to produce milk than they can produce cookies.