Using the same amount of resources, the United States and Canada can both produce lumberjack shirts and lumberjack boots, as shown in the following production possibilities frontiers:

a. Who has a comparative advantage in producing lumberjack boots? Who has a comparative advantage in producing lumberjack shirts? Explain your reasoning.
b. Does either country have an absolute advantage in producing both goods? Briefly explain.
c. Suppose that both countries are currently producing three pairs of boots and three shirts. Show that both can be better off if they each specialize in producing one good and then trade for the other.

Transcribed Image Text:

United States Canada Quantity of shirts Quantity of shirts made made 12 3 6 Quantity of boots made 3 4 Quantity of boots made 3 3.