Learning Path
Question & Answer
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Absolute Advantage
Comparative Advantage
Opportunity Cost
Production Possibilities
Understanding the Answer
Let's break down why this is correct
Comparative advantage shows that a country should make the good it can produce most cheaply in terms of what it gives up. Other options are incorrect because Absolute advantage is the ability to produce more of a good than another country, but it does not decide where to specialize; Opportunity cost is the amount of another good a country gives up to produce one more unit.
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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