Assume that two countries, using equal amounts of resources, can each produce any combination of capital goods and consumer goods described by the above production possibilities curve for each nation.

1. Which country has the absolute advantage in the production of capital goods? Explain how you determined your answer.
2. Which country has a comparative advantage in the production of consumer goods? Explain your answer using the concept of opportunity cost. (Show your work.)
3. If the two countries specialize and trade with each other, which country will export consumer goods? Explain how you determined your answer.

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