Peter Pundit, an economics reporter, states that the European Union (EU) is increasing its productivity very rapidly in all industries. He claims that this productivity advance is so rapid that output from the \(\mathrm{EU}\) in these industries will soon exceed that of the United States and, as a result, the United States will no longer benefit from trade with the EU. a. Do you think Peter Pundit is correct or not? If not, what do you think is the source of his mistake? b. If the \(\mathrm{EU}\) and the United States continue to trade, what do you think will characterize the goods that the EU sells to the United States and the goods that the United States sells to the EU?

A) Peter Pundit's mistake in his claim is that he focuses only on productivity and the absolute advantage of the European Union industries, overlooking the importance of comparative advantage and opportunity cost. Even if the EU has an absolute advantage in all industries, trade between the United States and the EU will still be beneficial as long as there is a comparative advantage. B) The characteristics of goods traded between the United States and the European Union will be determined by their respective comparative advantages. Each party is likely to specialize in producing and exporting goods in which they have lower opportunity costs, leading to mutual benefits and efficient use of resources.