If Ecuador has an absolute advantage in coffee and Argentina in wheat, then, according to trade theory:

Answers

The theory of comparative advantage states that countries should specialize in the production of goods and services that they produce at a lower opportunity cost compared to other countries. This means that Ecuador could specialize in producing more coffee than wheat while Argentina should specialize in producing more wheat than coffee. This arrangement will lead to the highest mutual gains when both countries trade with each other in their respective goods. Thus, in this situation, Ecuador has an absolute advantage in coffee and Argentina has an absolute advantage in wheat, which allows both countries to benefit through trade.

Answered by eric08

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