Consider 2 countries (the United States and the France) that use input such as labor to produce 2 different goods: cloth and wine. In France, 1 hour of labor can produce either 20 wines or 10 cloths. In the United States, 1 hour of labor can produce either 30 wines or 20 cloths. You are required to determine how should each country make optimize the use of labor that is by producing the good in which they have a comparative advantage.

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Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.