producing at a lower opportunity cost. The following Work It Out feature shows how to calculate absolute and

comparative advantage and the way to apply them to a country’s production.

WORK IT OUT

Calculating Absolute and Comparative Advantage
In Canada a worker can produce 20 barrels of oil or 40 tons of lumber. In Venezuela, a worker can produce 60

barrels of oil or 30 tons of lumber.

Country

Oil (barrels)

Lumber (tons)

Canada

20

Venezuela 60

TABLE 19.12

or 40

or 30

a. Who has the absolute advantage in the production of oil or lumber? How can you tell?

b. Which country has a comparative advantage in the production of oil?

c. Which country has a comparative advantage in producing lumber?

d.

e.

In this example, is absolute advantage the same as comparative advantage, or not?

In what product should Canada specialize? In what product should Venezuela specialize?
460 19 • International Trade

Step 1. Make a table like Table 19.12.
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