Multiple Choice
Suppose Country A can produce 10 pastries or 5 cakes per day, and Country B can produce 8 pastries or 4 cakes per day. Who has the comparative advantage in selling pastries?
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2. Introductory Economic Models
PPF - Comparative Advantage and Absolute Advantage
Multiple Choice
A country with an absolute advantage can produce a good or service:
A
using fewer resources than another country
B
only if it also has a comparative advantage
C
at a higher opportunity cost than another country
D
at the same cost as every other country
Verified step by step guidance1
Understand the concept of absolute advantage: It refers to the ability of a country to produce a good or service using fewer resources than another country.
Recall that absolute advantage focuses on the efficiency of production, meaning producing more output with the same input or the same output with fewer inputs.
Differentiate absolute advantage from comparative advantage: Comparative advantage is about producing at a lower opportunity cost, not necessarily using fewer resources.
Analyze the options given: The correct definition of absolute advantage aligns with producing using fewer resources, regardless of opportunity cost or comparison to other countries' costs.
Conclude that the statement 'using fewer resources than another country' correctly describes absolute advantage.
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