Question

SLOUTION FOR ABSLOUTE ADVANTGES

Answer 1

Absolute advantage means that a country can produce a greater quantity of a good with respect to another country. For example in a world of two countries, Country A can produce 10000 cars while Country B can produce 99 cars. Country A would have the absolute advantage in the production of cars over Country B.

However, students of economics will eventually learn that absolute advantage does not matter as much as comparative advantage. For example the U.S. could produce more clothing than Bangladesh if it wishes too, yet Bangladesh exports clothing to the U.S. despite the U.S.’s absolute advantage.