In a world economy there are two goods, guns and butter, and two countries, X and Y. Country X can produce both guns and butter with fewer resources per unit than country Y, but country X has a higher opportunity cost in the production of guns than country Y.
Which statement is correct?
1 )
X has an absolute advantage in butter but not in guns.
2 )
X has an absolute advantage in guns but not in butter.
X has a comparative advantage in butter.
4 )
X has a comparative advantage in guns
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