ECONOMICS
OPPORTUNITY COST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Peru
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U.S.
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neither
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not enough info
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Detailed explanation-1: -A comparative advantage exists when a country can produce goods at a lower opportunity cost compared to other countries. It is not possible for a country to have a comparative advantage in all goods. However, a country can have an absolute advantage in all goods.
Detailed explanation-2: -The United States has an absolute advantage in automobile production because it takes fewer Americans (6) to produce a car in one day than it takes Italians (8).
Detailed explanation-3: -To calculate absolute advantage, look at the larger of the numbers for each product. One worker in Canada can produce more lumber (40 tons versus 30 tons), so Canada has the absolute advantage in lumber. One worker in Venezuela can produce 60 barrels of oil compared to a worker in Canada who can produce only 20.
Detailed explanation-4: -Absolute Advantage: The ability of an actor to produce more of a good or service than a competitor. Comparative Advantage: The ability of an actor to produce a good or service for a lower opportunity cost than a competitor.