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Country x has an absolute advantage when it can produce corn at a lower cost than country y.
When its production costs are lower.
Its production costs for clothing were the lowest in the world.
Yes, since each country can individually specialize in its comparative advantage, the total income for both countries will increase. This is even true if one country has an absolute advantage in the production of all goods.
absolute cost advantage talks about the efficiency and cheaply a country incure in the production of goods and services against other country whiles comparative advantage talks about the opotunity cost of goods
Country x has an absolute advantage when it can produce corn at a lower cost than country y.
When its production costs are lower.
Its production costs for clothing were the lowest in the world.
Yes, since each country can individually specialize in its comparative advantage, the total income for both countries will increase. This is even true if one country has an absolute advantage in the production of all goods.
absolute cost advantage talks about the efficiency and cheaply a country incure in the production of goods and services against other country whiles comparative advantage talks about the opotunity cost of goods
When a country has an absolute advantage in production of that good it may specialize in producing that good.
Country X can grow corn more cheaply than Country Y.
Companies in Country A can produce computers at a lower cost.
Country X can manufacture cars more cheaply.
Absolute advantage and comparative advantage are two basic concepts to international trade. Under absolute advantage, one country can produce more output per unit of productive input than another. With comparative advantage, if one country has an absolute (dis)advantage in every type of output, the other might benefit from specializing in and exporting those products, if any exist.A country has an absolute advantage economically over another, in a particular good, when it can produce that good at a lower cost. Using the same input of resources a country with an absolute advantage will have greater output. Assuming this one good is the only item in the market, beneficial trade is impossible. An absolute advantage is one where trade is not mutually beneficial, as opposed to a comparative advantage where trade is mutually beneficial.A country has a comparative advantage in the production of a good if it can produce that good at a lower opportunity cost relative to another country. The theory of comparative advantage explains why it can be beneficial for two parties (countries, regions, individuals and so on) to trade if one has a lower relative cost of producing some good. What matters is not the absolute cost of production but the opportunity cost, which measures how much production of one good, is reduced to produce one more unit of the other good.
The principle of comparative advantage explains how trade can benefit all parties involved (countries, regions, individuals and so on), as long as they produce goods with different relative costs. The net benefits of such an outcome are called gains from trade. Usually attributed to the classical economist David Ricardo, comparative advantage is a key economic concept in the study of trade. Adam Smith had used the principle of absolute advantage to show how a country can benefit from trade if the country has the lowest absolute cost of production in a good (ie. it can produce more output per unit of input than any other country). The principle of comparative advantage shows that what matters is not the absolute cost, but the opportunity cost of production. The opportunity cost of production of a good can be measured as how much production of another good needs to be reduced to increase production by one more unit. The principle of comparative advantage shows that even if a country has no absolute advantage in any product (ie. it is not the most efficient producer for any good), the disadvantaged country can still benefit from specializing in and exporting the product(s) for which it has the lowest opportunity cost of production.[1] [2] It has been argued that it is impossible to falsify the Theory of Comparative Advantage.[3] [4]. The principle of comparative advantageexplains how trade can benefit all parties involved (countries, regions, individuals and so on), as long as they produce goods with different relative costs. The net benefits of such an outcome are called gains from trade. Usually attributed to the classical economist David Ricardo, comparative advantage is a key economic concept in the study of trade. Adam Smith had used the principle of absolute advantage to show how a country can benefit from trade if the country has the lowest absolute cost of production in a good (ie. it can produce more output per unit of input than any other country). The principle of comparative advantage shows that what matters is not the absolute cost, but the opportunity cost of production. The opportunity cost of production of a good can be measured as how much production of another good needs to be reduced to increase production by one more unit. The principle of comparative advantage shows that even if a country has no absolute advantage in any product (ie. it is not the most efficient producer for any good), the disadvantaged country can still benefit from specializing in and exporting the product(s) for which it has the lowest opportunity cost of production.[1] [2] It has been argued that it is impossible to falsify the Theory of Comparative Advantage.[3] [4].
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