ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Comparative advantage. Even a country that is more efficient (has absolute advantage) in everything it makes would benefit from trade.

Detailed explanation-2: -Absolute advantage describes a situation in which an individual, business or country can produce more of a good or service than any other producer with the same quantity of resources. The United States, for example, has a skilled workforce, abundant natural resources, and advanced technology.

Detailed explanation-3: -Absolute advantage is the ability of an individual, company, region, or country to produce a greater quantity of a good or service with the same quantity of inputs per unit of time, or to produce the same quantity of a good or service per unit of time using a lesser quantity of inputs, than its competitors.

Detailed explanation-4: -Even when one country has an absolute advantage in all products, trade can still benefit both sides. This is because gains from trade come from specializing in one’s comparative advantage.

Detailed explanation-5: -Even when a country has high levels of productivity in all goods, it can still benefit from trade. Gains from trade come about as a result of comparative advantage. By specializing in a good that it gives up the least to produce, a country can produce more and offer that additional output for sale.