ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A country that has an absolute advantage in producing all goods still stands to benefit from trade with other countries, since the basis of the gains for trade is comparative advantage, not absolute advantage. It is not possible for an individual or country to have a comparative advantage in all goods.

Detailed explanation-2: -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.

Detailed explanation-3: -However, a country can have an absolute advantage in all goods. An absolute advantage exists when a country is simply the best (most efficient) in producing a product or service. It is in the best interest of countries to produce the goods and services in which they have the highest comparative advantage.

Detailed explanation-4: -Absolute advantage is when a producer can provide a good or service in greater quantity for the same cost, or the same quantity at a lower cost, than its competitors.