distinction between absolute advantage and comparative advantage Solution Absolu

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Absolute Advantage means you can produce a good using less resources. Comparative Advantage means you can produce a good at smaller opportunity cost. The standard example is 2 countries and 2 products. Say country A - 1 employee can produce in a week. 2 Cars or 700 shirts Country B 1 employee can produce 1 Car or 300 shirts. Country A has an absolute advantage in Cars and in shirts. But Country B has a Competitive Advantage in Cars as 1 car = 300 shirts to them while 1 car = 350 shirts in Country A. OR What are the differences between absolute advantage and comparative advantage? Economics Questions Answers.com > Wiki Answers > Categories > Business & Finance > Economics View Slide Show Best Answer Answer Study Island: A country has comparative advantage if it can produce a good for less cost than any other nation. Absolute advantage and comparative advantage are two basic concepts to international trade. Under absolute advantage, one country can produce more output per unit of productive input than another. With comparative advantage, if one country has an absolute (dis)advantage in every type of output, the other might benefit from specializing in and exporting those products, if any exist. A country has an absolute advantage economically over another, in a particular good, when it can produce that good at a lower cost. Using the same input of resources a country with an absolute advantage will have greater output. Assuming this one good is the only item in the market, beneficial trade is impossible. An absolute advantage is one where trade is not mutually beneficial, as opposed to a comparative advantage where trade is mutually beneficial. A country has a comparative advantage in the production of a good if it can produce that good at a lower opportunity cost relative to another country. The theory of comparative advantage explains why it can be beneficial for two parties (countries, regions, individuals and so on) to trade if one has a lower relative cost of producing some good. What matters is not the absolute cost of production but the opportunity cost, which measures how much production of one good, is reduced to produce one more unit of the other good.

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