What is the difference between absolute advantage and comparative advantage quizlet?
Absolute advantage is the ability to produce a good using fewer inputs than another producer, while comparative advantage is the ability to produce a good at a lower opportunity cost than another producer (reflecting the relative opportunity cost). Comparative advantage is more important for trade.
Does comparative advantage require absolute advantage?
Comparative advantage does not require absolute advantage. Absolute advantage refers to the production of a good with a smaller quantity of inputs, whereas comparative advantage refers to the ability to produce a particular good at a lower opportunity cost than another party.
What is the difference between comparative advantage and absolute advantage Edgenuity?
What is the difference between comparative advantage and absolute advantage? absolute advantage forcuses on which of yous uses the fewest resources, but comparative advantage focuses on what else those resources could have been produced that is on the opportunity cost of those resources.
What is the difference between absolute advantage and comparative advantage case study starting a business?
Absolute advantage is the ability to produce a good or a service at a lower production cost than competitors. Comparative advantage is the ability to produce a good or service at a lower opportunity cost than competitors.
What does China have an absolute advantage in?
China and Consumer Electronics: Many consumer electronics are manufactured in China. China can produce such goods more efficiently, which gives it an absolute advantage relative to many countries. Imagine that Economy A can produce 5 widgets per hour with 3 workers.
How do you calculate absolute advantage?
To calculate absolute advantage, look at the larger of the numbers for each product. One worker in Canada can produce more lumber (40 tons versus 30 tons), so Canada has the absolute advantage in lumber. One worker in Venezuela can produce 60 barrels of oil compared to a worker in Canada who can produce only 20.
What absolute advantage does the United States employ?
Production Possibilities and Comparative Advantage The United States has an absolute advantage in productivity with regard to both shoes and refrigerators; that is, it takes fewer workers in the United States than in Mexico to produce both a given number of shoes and a given number of refrigerators.
Which of the following statements best describes a comparative advantage?
Which of the following statements best describes a comparative advantage? It is the benefit a country has in a given industry if it can make products at a lower opportunity cost than other countries.
Can a country have a comparative advantage without having an absolute advantage?
It is not possible for a country to have a comparative advantage in all goods. However, a country can have an absolute advantage in all goods. It is in the best interest of countries to produce the goods and services in which they have the highest comparative advantage.
What are the disadvantages of comparative advantage?
Limitations of comparative advantage theory Transport costs and tariffs and exchange rates may change the relative prices of goods and may distort comparative advantages. Imperfect competition may lead to prices being different to opportunity cost ratios.
How to determine absolute advantage?
Make a table like Table 19.6. To calculate absolute advantage, look at the larger of the numbers for each product. To calculate comparative advantage, find the opportunity cost of producing one barrel of oil in both countries. Calculate the opportunity cost of one lumber by reversing the numbers, with lumber on the left side of the equation.
What companies have comparative advantage?
Amazon (AMZN) is an example of a company focused on building and maintaining a comparative advantage. The e-commerce platform has a level of scale and efficiency that is difficult for retail competitors to replicate, allowing it to rise to prominence largely through price competition.
What are some examples of absolute advantage?
Absolute advantage may also arise from the level of available capital, such as factories or infrastructure. For example, India has an absolute advantage in operating call centers compared to the Philippines because of its low cost of labor and abundant labor force.
What are some disadvantages of comparative advantage?
Government may restrict trade. If a country removes itself from an international trade agreement or a government imposes tariffs,it could create complications for the companies that were relying on