Consider following the following situations and answer which of the following is

Question

Consider following the following situations and answer which of the following is most appropriate to use in order to determine absolute advantage of a nation vis-à-vis another nation? a. One compares two companies to determine which company can produce one commodity best without reference to any other product b. One compares two countries to determine which country can produce one commodity best without reference to any other commodity c. One compares two countries to determine which country can produce one commodity relatively better in relation to another commodity Od. One compares two companies to determine which company can produce one commodity relatively better in relation to another commodity

Explanation / Answer

To determine absolute advantage of a nation in realtion to another nation, we compare those two countries to determine which country can produce one commodity relatively better without reference to any other commodity. Or, simply if a country can produce one good(say, good A) in a cheaper way or in higher amount than the other country's good A production, then the former country is said to have absolute advantage in production of good A. Here, we don't compare that country's another good production.

Answer-option B

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