Our country and Herapi can produce coconuts and machetes, but the question is, who has the absolute advantage? An absolute advantage means producing more of a good than our competitor; in this case, it was our country. Danoli produced 300 coconuts to their 100 coconuts and 50 machetes to their 25. We held the absolute advantage for both of the goods. Comparative advantage indicates who can produce a good at a lower opportunity cost than the competitor. The opportunity cost is what the country is giving up in order to produce its goods. Now, we will find which country gives up a lower opportunity cost in machetes and coconuts. Here, we have found that Danoli has a comparative advantage over coconuts because their opportunity cost is lower than Herapi's. Their cost for one coconut is 0.16 machete compared to Herapi's coconut is 0.25 machete. The comparative advantage for a machete is Herapi, being that one machete is for four coconuts, and Danoli's one machete is for six coconuts, being that four is less than 6, they have the lower opportunity cost. Opportunity cost is significant for trading because it helps a country specialize in a good where their resources and