Question

The capability of one nation to produce more of a good with the same amount of input than another country is:

A. a comparative advantage

B. an absolute advantage

C. a mercantilist advantage

D. none of the above

E. two of A, B, and C

Answer 1

A country has an absolute advantage when it can produce a good with fewer resources than another country. A comparative advantage is when a country can produce a good at a lower cost in terms of other goods. Specialization based on comparative advantage leads to gains from trade.

Step-by-step explanation:

A country has an absolute advantage in those products in which it has a productivity edge over other countries; it takes fewer resources to produce a product. A country has a comparative advantage when it can produce a good at a lower cost in terms of other goods. Countries that specialize based on comparative advantage gain from trade.