Absolute advantage refers to the uncontested superiority of a country or business to produce a particular good better. Comparative advantage introduces
opportunity cost
as a factor for analysis in choosing between different options for production diversification.
What is the difference between absolute advantage and comparative advantage?
Absolute advantage refers to the ability to produce more or better goods and services than somebody else. Comparative advantage refers to the ability to produce goods and services at a
lower opportunity cost
, not necessarily at a greater volume or quality.
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 is an example of an absolute advantage?
A clear example of a nation with an absolute advantage is
Saudi Arabia
, The ease with which oil is extracted which greatly reduces the cost of extraction is its absolute advantage over other nations.
Is there is any difference between absolute advantage comparative advantage explain and provide examples to support your answer?
Absolute advantage focuses on the marginal cost of producing a good, whereas comparative advantage specifically focuses on the
opportunity cost
of production. Trade decisions based on comparative advantage between countries are always mutually beneficial.
What are the four main sources of comparative advantage?
Comparative advantage is determined by a country’s resources, that is the
land, labour, capital and enterprise
.
Who has comparative advantage example?
For example, if
a country is skilled at making both cheese and chocolate
, they may determine how much labor goes into producing each good. If it takes one hour of labor to produce 10 units of cheese and one of of labor to produce 20 units of chocolate, then this country has a comparative advantage in making chocolate.
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 do you find comparative advantage?
Taking this example, if countries A and B allocate resources evenly to both goods combined output is: Cars = 15 + 15 = 30; Trucks = 12 + 3 = 15, therefore world output is 45 m units. It is being able to
produce goods by using fewer resources, at a lower opportunity cost
, that gives countries a comparative advantage.
Is it possible to have a comparative advantage without having an absolute advantage?
A comparative advantage exists when a country can produce goods at a lower opportunity cost compared to other countries.
It is not possible for a country
to have a comparative 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 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.
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.
Which country has absolute advantage?
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.
Which situation is the best example of opportunity cost?
It is the important concept in economics and also the relationship which is between choice and scarcity. A good example of opportunity cost is
you can spend money and time on other things but you can not spend time reading books or the money in doing something which can help
.
What is the difference between comparative advantage and absolute advantage Brainly?
Absolute advantage is a condition in which a country can produce particular goods at a lower cost in comparison to another country. On the other hand, comparative advantage is a condition in which a country produces particular goods at
a lower opportunity cost
in comparison to other countries.
Which country has a comparative advantage?
For example
Ireland
has a comparative advantage in cheese and butter due to climate and a large amount of land suitable for dairy cows. China has a comparative advantage in electronics because it has an abundance of labor.
