Suppose that each U.S worker can produce 8 units of food or 2 units of clothing daily. Fredonia, which has the same number of workers, each worker can produce 7 units of food or 1 unit of clothing daily. Why does the United States have an absolute advantage in both goods? Which country enjoys a comparative advantage in food? Why?
Opportunity cost for food is lower in Fredonia than in US and Fredonia has a comparative advantage over US in food. Opportunity cost for clothing is lower in US than in Fredonia and US has a comparative advantage over Fredonia in clothing. The productivity of US worker is more than the productivity of Fredonian worker both in Food and Clothing. Thus, United States has an absolute advantage in both goods.