In a two good, two country situation each country benefits from an absolute advantage (i.e. more efficient production as they can make more goods with the same resources) in one of the two goods. This provides each country an incentive to specialise in the good exhibiting an abosolute advantage and to acquire the good it would otherwise produce inefficiently by trading with the other country.
In the following example we have two countries and both produce two goods. The country that can produce the most units of each good given the same resources has the absolute advantage in the production of that good. As the absolute advantage is reciprocal there is a clear incentive to specialise and trade. In this example Australia has an advantage in lamb and China has advantage in cloth.
In this sutatiuon the the PPF for each country would intersect (see below).
