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Question & Answer
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A country with an absolute advantage can produce more of both goods compared to another country.
Comparative advantage means a country can produce a good at a lower opportunity cost than another country.
Absolute advantage only considers the total output of one good, ignoring the other.
A country can have a comparative advantage in producing a good but still have an absolute disadvantage overall.
Countries with absolute advantages should always trade with each other.
Understanding the Answer
Let's break down why this is correct
Comparative advantage means a country can produce a good at a lower opportunity cost than another country. Other options are incorrect because The mistake here is to think absolute advantage means a country can make more of every good; This option assumes absolute advantage only looks at one product.
Key Concepts
Production Advantage
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Deep Dive: Production Advantage
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Definition
Production Advantage refers to a country's ability to produce goods more efficiently than another country. Absolute Advantage is when one country can produce more of both goods, while Comparative Advantage is when a country has a lower opportunity cost in producing a particular good. Understanding production advantages helps countries specialize in goods where they are most efficient, leading to overall economic growth.
Topic Definition
Production Advantage refers to a country's ability to produce goods more efficiently than another country. Absolute Advantage is when one country can produce more of both goods, while Comparative Advantage is when a country has a lower opportunity cost in producing a particular good. Understanding production advantages helps countries specialize in goods where they are most efficient, leading to overall economic growth.
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