What Is Absolute Advantage Example?

by | Last updated on January 24, 2024

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Absolute advantage refers to the

ability of a country to produce a good more efficiently than other countries

. … For example, the Canadian economy, which is rich in low cost land, has an absolute advantage in agricultural production relative to some other countries.

How does the US benefit from comparative advantage?

The United States’ comparative advantage is in

specialized, capital-intensive labor

. American workers produce sophisticated goods or investment opportunities at lower opportunity costs. Specializing and trading along these lines benefit each.

What products does the US have an absolute advantage in?

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 country has an absolute advantage in?

In Table 1,

Saudi Arabia

has an absolute advantage in the production of oil because it only takes an hour to produce a barrel of oil compared to two hours in the United States. The United States has an absolute advantage in the production of corn.

Can a country have absolute advantage in all goods?

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

. An absolute advantage exists when a country is simply the best (most efficient) in producing a product or service.

How do you know if you have 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.

How do you use absolute advantage in a sentence?

If

absolute advantage rules, capitalism itself will redistribute income and wealth from rich countries to poor ones

. Many developing countries have an absolute advantage in the price of unskilled labor.

What is an example of a comparative advantage?

Comparative advantage is

what you do best while also giving up the least

. For example, if you’re a great plumber and a great babysitter, your comparative advantage is plumbing. That’s because you’ll make more money as a plumber.

What does the US import the most?

Rank US Import Product 2020 Value (US$) 1 Cars $145,659,382,000 2 Computers, optical readers $104,948,207,000 3 Phone system devices including smartphones $102,547,452,000 4 Medication mixes in dosage $95,175,568,000

What does China have a comparative advantage in?

The model predicts that China has a comparative advantage in

heavy goods in nearby markets

, and lighter goods in more distant markets. This theory motivates a simple empirical prediction: within a product, China’s export unit values should be increasing in distance.

Who has absolute advantage?

Absolute advantage is when

a producer

can produce a good or service in greater quantity for the same cost, or the same quantity at a lower cost, than other producers. Absolute advantage can be the basis for large gains from trade between producers of different goods with different absolute advantages.

Does Canada have an absolute advantage?

The Canadian economy has an

absolute advantage in agricultural goods

relative to most other countries globally. This because land is relatively abundant in Canada, as well as low cost.

Which country has the absolute advantage in bananas?


Puerto Rico

has the absolute advantage in bananas, while Jamaica has the absolute advantage in sugar cane.

Does the US have an absolute advantage?

Country Shoe Production Refrigerator Production Total 9,500 28,500

Which country has absolute advantage in lumber Why?

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.

Which country has an absolute advantage in producing cars?


The United States

has the absolute advantage in the production of both cars and wine. It can produce more of both goods.

Rachel Ostrander
Author
Rachel Ostrander
Rachel is a career coach and HR consultant with over 5 years of experience working with job seekers and employers. She holds a degree in human resources management and has worked with leading companies such as Google and Amazon. Rachel is passionate about helping people find fulfilling careers and providing practical advice for navigating the job market.