Final answer:
Opportunity cost helps determine which country has a comparative advantage based on lower foregone alternatives. Absolute advantage is determined by the overall production capabilities. Calculation involves comparing opportunity costs and total production between countries.
Step-by-step explanation:
The concept in question relates to opportunity cost, which is a fundamental idea in economics, specifically in the context of comparative advantage and absolute advantage. Opportunity cost refers to the cost of forgoing the next best alternative when making a decision. In the context of a country's production choices, it is used to determine which country has a comparative or absolute advantage in the production of certain goods.
For instance, to calculate the opportunity cost of producing 80 additional radios in Japan and Malaysia, one would need to know how many units of another good (such as rubber) could have been produced with the resources used to make the 80 radios. The country with the lower opportunity cost of producing radios would have a comparative advantage in radios.
To determine who has an absolute advantage, you compare the total production capabilities of one country to another. The country that can produce more of a good with the same amount of resources has the absolute advantage. Comparative advantage, on the other hand, is determined by which country has the lower opportunity cost of production. They may not produce the most overall but can produce the good at a lower opportunity cost.