Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 36 units of food per year or 18 units of clothing. Which of the following is true?

a. Georgeland has an absolute but not a comparative advantage in producing clothing.

b. Georgeland has both an absolute and a comparative advantage in producing clothing.

c. Alland has an absolute but not a comparative advantage in producing food.

d. Alland has both an absolute and a comparative advantage in producing food.

Option (a) is correct.

Explanation:

Alland can produce 32 units of food per person per year or 16 units of clothing per person per year:

Opportunity cost of producing a unit of food = (16 : 32)

= 0.5 units of clothing

Opportunity cost of producing a unit of clothing = (32 : 16)

= 2 units of food

Georgeland can produce 36 units of food per year or 18 units of clothing:

Opportunity cost of producing a unit of food = (18 : 36)

= 0.5 units of clothing

Opportunity cost of producing a unit of clothing = (36 : 18)

= 2 units of food

Therefore, the Georgeland has a absolute advantage in producing both the goods because it can produce more quantity of both the goods with the same resources as Alland. But the Georgeland has not having comparative advantage in producing either of the goods.