ECONOMICS
TRADE EXCHANGE AND INTERDEPENDENCE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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an export advantage
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a comparative advantage
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an absolute advantage
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a production possibility advantage
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Detailed explanation-1: -A country has an absolute advantage in those products in which it has a productivity edge over other countries; it takes fewer resources to produce a product. A country has a comparative advantage when a good can be produced at a lower cost in terms of other goods.
Detailed explanation-2: -“Two countries can achieve gains from trade even if one of the countries has an absolute advantage in the production of all goods.”: true because each of the countries has to have a comparative advantage in some product.
Detailed explanation-3: -Thus, Mali has the absolute advantage in producing dates. Both countries have same per farmer production capacity for producing grains.
Detailed explanation-4: -Comparative advantage is usually measured in opportunity costs, or the value of the goods that could be produced with the same resources. This is then compared with the opportunity costs of another economic actor to produce the same goods.