📚 Learning Guide
Understanding Comparative Advantage
hard

If a country has an absolute advantage in producing both cars and computers compared to another country, it will not benefit from specializing in either product due to the lack of comparative advantage.

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Learning Path

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A

True

B

False

Understanding the Answer

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Answer

When we talk about absolute advantage, it means one country can produce more of a good than another country using the same resources. However, just because a country is better at making both cars and computers doesn't mean it should only focus on those products. Instead, it should look at comparative advantage, which is about producing goods at a lower opportunity cost. For example, if Country A can make 10 cars or 5 computers, while Country B can make 6 cars or 3 computers, Country A has an absolute advantage in both. But if Country A gives up fewer cars to make computers than Country B does, it should specialize in computers, allowing both countries to trade and benefit from their strengths.

Detailed Explanation

A country can still benefit from specializing. Other options are incorrect because This answer thinks that having an absolute advantage means no specialization is helpful.

Key Concepts

Comparative Advantage
Absolute Advantage
Opportunity Cost
Topic

Understanding Comparative Advantage

Difficulty

hard level question

Cognitive Level

understand

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