business chapter 4 review (ablsoute and comparitive advantage)

Business chapter 4 review (ablsoute and comparitive advantage)

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CH 4—ABSOLUTE AND COMPARATIVE ADVANTAGE Q: I DON’T UNDERSTAND THE DIFFERENCE BETWEEN ABSOLUTE AND COMPARATIVE ADVANTAGE. ANSWER: The following might help you distinguish between absolute and comparative advantage. ABSOLUTE ADVANTAGE An ABSOLUTE ADVANTAGE is the ability to produce a specific product more efficiently than another NATION. An absolute advantage exists when a country can produce something more cheaply and/or of higher quality than any other country. Some countries are better equipped than other countries to produce particular goods or services. The reason may be a country’s natural resources, its labor supply, customs, or a historical accident. Such a country would be best off if it could specialize in the production of such products, because it can produce them most efficiently. The country could use what is needed of these products and then trade the surplus for products it could not produce efficiently on its own. Saudi Arabia has thus specialized in the production of crude oil and petroleum products,
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This note was uploaded on 09/21/2009 for the course BUS 121.002 taught by Professor Jasonpowell during the Spring '08 term at SFASU.

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Business chapter 4 review (ablsoute and comparitive advantage)

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