Suppose Manufacturer A can produce 10 cars or 20 trucks per day, while Manufacturer B can produce 8 cars or 16 trucks per day. Based on this information, which manufacturer has the absolute advantage?

• A. Neither manufacturer has an absolute advantage
• B. Both manufacturers have the same absolute advantage
• C. Manufacturer A
• D. Manufacturer B

Answer: (C)

Verified step by step guidance

1. Understand the concept of absolute advantage: A manufacturer has an absolute advantage if it can produce more of a good with the same resources or in the same amount of time compared to another manufacturer.
2. Identify the production capabilities of each manufacturer: Manufacturer A can produce 10 cars or 20 trucks per day, and Manufacturer B can produce 8 cars or 16 trucks per day.
3. Compare the production of cars: Manufacturer A produces 10 cars per day, while Manufacturer B produces 8 cars per day. Since 10 > 8, Manufacturer A has an absolute advantage in car production.
4. Compare the production of trucks: Manufacturer A produces 20 trucks per day, while Manufacturer B produces 16 trucks per day. Since 20 > 16, Manufacturer A also has an absolute advantage in truck production.
5. Conclude that Manufacturer A has the absolute advantage in producing both cars and trucks because it can produce more of each good per day than Manufacturer B.