Question

Which of the following statements correctly describes the difference between absolute advantage and comparative advantage? Option 1: Absolute advantage refers to a country's ability to produce a good with fewer resources, while comparative advantage is the ability to produce a good at a lower opportunity cost. Option 2: Absolute advantage is the ability to produce more of a good than another country, while comparative advantage is the ability to produce a good with the same resources. Option 3: Absolute advantage and comparative advantage are essentially the same concept and can be used interchangeably. Option 4: Absolute advantage is related to cost efficiency, while comparative advantage is about technological superiority.

Answer 1

Absolute advantage refers to a country's ability to produce a good with fewer resources, while comparative advantage is the ability to produce a good at a lower opportunity cost.

Absolute advantage refers to a country's ability to produce a good with fewer resources, while comparative advantage is the ability to produce a good at a lower opportunity cost. This means that even if a country can produce more of a good than another country (with absolute advantage), it may still have a lower opportunity cost for producing a different good (with comparative advantage).

Learn more about Difference between absolute advantage and comparative advantage