Absolute Advantage in Production

Steps:

• Identify maximum outputs: X produces 10 cars or 20M bikes; Y produces 20M cars or 40M bikes.
• Calculate absolute advantage: Compare outputs using all resources for each good.
• For cars, Y produces 20M vs. X's 10, so Y has advantage.
• For bikes, Y produces 40M vs. X's 20M, so Y has advantage in both.

Why A is correct:

• Absolute advantage exists when a country produces more of a good with the same resources, per economic definition; Y outperforms X in both cars and bikes.

Why the others are wrong:

• B: X has no absolute advantage, as Y produces more of both goods.
• C: Opportunity costs are identical (1 car = 2M bikes for both), but this does not negate Y's absolute edge.
• D: No comparative advantage difference (same costs), so specialization yields no trade gains.

Final answer: A