Examples of absolute and comparative advantage
What is an example of an absolute advantage?
As an example, if Japan and Italy can both produce automobiles, but Italy can produce sports cars of a higher quality and at a faster rate with greater profit, then Italy is said to have an absolute advantage in that particular industry.
What is an example of comparative advantage?
For example, if a country is skilled at making both cheese and chocolate, they may determine how much labor goes into producing each good. If it takes one hour of labor to produce 10 units of cheese and one of of labor to produce 20 units of chocolate, then this country has a comparative advantage in making chocolate.
What is the difference between absolute advantage and comparative advantage with examples?
Absolute advantage is one when a country produces a commodity with the best quality and at a faster rate than another. On the other hand, comparative advantage is when a country has the potential to produce a particular product better than any other country.
Which country has absolute advantage and comparative advantage?
The United States has an absolute advantage in the production of corn. To simplify, let’s say that Saudi Arabia and the United States each have 100 worker hours (see Table 19.2).
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A Numerical Example of Absolute and Comparative Advantage.
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A Numerical Example of Absolute and Comparative Advantage.
| Country | Oil Production (barrels) | Corn Production (bushels) |
|---|---|---|
| United States (C’) | 20 | 60 |
Which is an example of comparative advantage quizlet?
the ability to produce a good at a lower opportunity cost than another entity. For example, for every pillow Owen embroiders his opportunity cost is 222 scarves knitted, while Penny must forego 333 scarves for every pillow she embroiders, so Owen has comparative advantage in embroidering pillows.
What does China have an absolute advantage in?
Answer and Explanation: China has the largest population of any country in the world. Because of this, they have a larger labor force than any country on the planet. This means that China has an absolute advantage in producing any product that requires a high number of workers to produce.
Which country has an absolute advantage?
Examples of absolute advantage
China, Thailand, and Vietnam, on the other hand, produce and export low-cost manufactured goods. These three countries have an absolute advantage because of their considerably lower unit labor costs.
What country has a comparative advantage?
For example Ireland has a comparative advantage in cheese and butter due to climate and a large amount of land suitable for dairy cows. China has a comparative advantage in electronics because it has an abundance of labor.
Does China have a comparative or absolute advantage?
China, therefore, has a comparative advantage in producing rice. On the other hand, the opportunity cost of a banana is 2/3 of a pound of rice in China and 1/2 of a pound of rice in the United States, and the United States has a comparative advantage in producing bananas.
How do you explain comparative advantage?
Comparative advantage is an economy’s ability to produce a particular good or service at a lower opportunity cost than its trading partners. Comparative advantage is used to explain why companies, countries, or individuals can benefit from trade.
What is a comparative advantage in economics?
A person has a comparative advantage at producing something if he can produce it at lower cost than anyone else. Having a comparative advantage is not the same as being the best at something.
Which situation is an example of comparative advantage in international market?
For example, countries with plentiful oil resources can generally produce oil inexpensively. Because Saudi Arabia produces oil very cheaply, it holds a comparative advantage in oil, and it exports oil in order to finance its purchases of imports.
What gives a country a comparative advantage?
In economic terms, a country has a comparative advantage when it can produce at a lower opportunity cost than that of trade partners. While a country cannot have a comparative advantage in all goods and services, it can have an absolute advantage in producing all goods.
What is an absolute advantage in economics?
Absolute advantage is when a producer can provide a good or service in greater quantity for the same cost, or the same quantity at a lower cost, than its competitors.
What is the difference between absolute and comparative advantage quizlet?
absolute advantage refers to the ability to produce more of a good or service using the same amount of resources and comparative advantage refers to the ability to produce a good or service at a lower opportunity cost.
Why is comparative advantage more important than absolute advantage?
Comparative advantage helps in more effective decision-making for countries for resource allocation and production hence more beneficial for economies than an absolute advantage.
Which country has absolute advantage?
Examples of absolute advantage
China, Thailand, and Vietnam, on the other hand, produce and export low-cost manufactured goods. These three countries have an absolute advantage because of their considerably lower unit labor costs.
Can you have comparative and absolute advantage?
A country that has an absolute advantage in producing all goods still stands to benefit from trade with other countries, since the basis of the gains for trade is comparative advantage, not absolute advantage. It is not possible for an individual or country to have a comparative advantage in all goods.
Which of the following is an example of absolute advantage quizlet?
Which of the following is an example of absolute advantage? The United States makes software more efficiently than any other country.
Who has the absolute advantage in oil?
Saudi Arabia
Since Saudi Arabia gives up the least to produce a barrel of oil, (1414 < 22 in Table 4) it has a comparative advantage in oil production.
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A Numerical Example of Absolute and Comparative Advantage.
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A Numerical Example of Absolute and Comparative Advantage.
| Country | Oil Production (barrels) | Corn Production (bushels) |
|---|---|---|
| Total World Production | 80 | 70 |
What is the United States absolute advantage?
So, all else equal, the United States has an absolute advantage in the production of copper wire. Therefore, the United States should produce copper wire, sell it or trade it with Mexico or other countries, and buy other goods from them. Trade also involves another type of advantage—comparative advantage.