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What is absolute cost advantage?
its really simple. an absolute cost advantage is that you are making a profit of the cost of what you are producing . In brief terms it is basically finding out methods and using them to minimise the cost of producing a good,so whatever the business manages to save through those methods are ABSOLUTE COST ADVANTAGE
When might a country specialize in producing a particular good?
When a country has an absolute advantage in production of that good it may specialize in producing that good.
What is the difference between theory of absolute advantage and a theory of comparative advantage?
Those theories both refer to international trade, however absolute advantage was mentioned earlier. According to it, a trade between 2 countries is possible only if one has absolute advantage (produces a good with less costs or with less time) and other has absolute disadvantage in producing that good but at the same time it must have an absolute advantage in producing the secong good. If a country produces a good better (cheaper/faster), it would specialize on it and export. Theory assumes that only 2 counties and 2 goods exist, no other costs except for labour are taken into account.
Contrast between absolute advantage and comparative advantage?
Absolute advantage is when a producer can produce a good using less resources than their competitor(s), whereas comparative advantage is when a producer does not hold the absolute advantage but their ratio in producing a good is smaller. Example: Brian can type 30 words per minute and iron 10 shirts per house. John can type 15 words per minute and iron 8 shirts per hour. Though Brian has the absolute advantage in ironing, John has the comparative advantage.
What is an example that illustrates the difference between comparative advantage and absolute advantage in international trade?
An example that illustrates the difference between comparative advantage and absolute advantage in international trade is the scenario where Country A can produce both cars and computers more efficiently than Country B. However, Country A has a comparative advantage in producing cars, while Country B has a comparative advantage in producing computers. This means that even though Country A has an absolute advantage in both products, it is more beneficial for both countries to specialize in the product they can produce most efficiently and trade with each other.
What are the concepts of absolute advantage and comparative advantage?
Absolute advantage refers to the ability of a country or individual to produce a good or service more efficiently than others, using fewer resources. In contrast, comparative advantage focuses on the relative opportunity cost of producing goods, meaning that a country should specialize in producing goods for which it has the lowest opportunity cost, even if it doesn't have an absolute advantage. This specialization allows for more efficient production and trade, ultimately benefiting all parties involved. Both concepts are fundamental to international trade and economics.
How is absolute advantage found?
Absolute advantage is found by comparing the productivity of different individuals, companies, or countries in producing a specific good or service. If one entity can produce more of that good or service with the same resources than another entity, it has an absolute advantage. This concept highlights efficiency in production and helps identify where trade can be beneficial, as entities can specialize in what they produce best.
What is the Assumption of absolute cost advantage?
what are the assumptions of the absolute advantage cost?
Differences between absulate advantage and comparetive advantage?
According to the definition I found, comparative advantage means being able to produce a product at a lower cost than others and absolute advantage means being the best at something or producing the best product.
Examples of absolute and comparative advantage?
Absolute advantage: Vietnam can produce 1000 million tons of rice while South Korea can produce 800 million tons of rice => Vietnam has absolute advantage (since it can produce more than Korea) Comparative advantage: Same example: Vietnam and Korea. To produce 1 more tonnes of rice, Vietnam has to give up producing 3 cars. However, to produce 1 more tonnes of rice, South Korea only have to give up producing 1 cars. => There is a lower opportuniy cost for Korea to produce rice. i.e. South Korea has the comparative advantage.
What is Adam Smith's Absolute Advantage Theory?
The theory of "Absolute Advantage" is defined by the ability of a nation, business entity or persons to produce goods and services at much lower prices compared to that of their competitors or other entities. Any entity can also be considered to have absolute advantage in more than one product or service.
How do absolute advantage and comparative advantage have in common?
Firstly absolute advantage is where a firm or producer can produce the good using less/fewer resources than another competitor, therefore the producer has the absolute advantage and is more economically efficent. Whereas Comparative advantage is where a firm can produce a good at a lower opportunity cost than another producer. So these to economic situations are very similar and are both about which producer is most economically efficent to produce certain goods, though they have one main thing in common. Knowing who has the absolute or the comparative advantage means the producers can use specialisation to esure the least resources are produced and the best firms who can produce the good the best are producing them.
