The difference between
Explanation of Solution
Comparative advantage refers the ability of a nation to produce goods and services at a lower
Absolute advantage: Absolute advantage refers to the ability to produce a good using fewer inputs than another producer does.
Comparative advantage: Comparative advantage refers to the ability to produce a good at a lower opportunity cost than another producer.
Want to see more full solutions like this?
Chapter 2 Solutions
Principles of Microeconomics
- What are the impacts of comparative advantage and absolute advantage?arrow_forwardIs absolute advantage or comparative advantage more important for trade? Give an Examplearrow_forwardWhat is absolute advantage? What is comparative advantage? Under what conditions does comparative advantage lead to gains from trade?arrow_forward
- During the summer you have made the decision to attend summer school, which prevents you from working at your usual summer job in which you normally earn $6,000 for the summer. Your tuition cost is $3,000 and books and supplies cost $1,300. In terms of dollars, what is the opportunity cost of attending summer school? Show your calculation. What is comparative advantage? Give an example. Why does it make sense for economies to specialize according to comparative advantage and trade? What is the production possibilities frontier? What economic concepts are represented in the production possibilities model?arrow_forwardComparative advantage is an important concept to explain how economies work. Because of comparative advantage, it is possible for people to use their skills and time productively even if they are not the best at something. To help illustrate the usefulness of this concept: Think of an example (work, family chores, school projects, etc.) where you might not have an absolute advantage at something, but you do have a comparative advantage. By this, I mean that you might not be the fastest or the best at a particular job. Other employees, family members, etc. may do the job quicker or better than you could. But their opportunity cost was high, meaning they had something more necessary for them to do, so it made sense for you to do this job. Explain how this was an example of you having a comparative advantage but not an absolute advantage. Did you (and the others in your example) specialize according to comparative advantage? What job(s) did you do? What did other people do? Did this…arrow_forwardExplain the difference between absolute advantage and comparative advantage. Which is more important in determining trade patterns, absolute advantage or comparative advantage? Why?arrow_forward
- Bob and Erik are both experienced in making pizzas and burgers. In one day, Bob can make 8 pizzas or 32 burgers. With the same effort and in the same day, Erik can make 12 pizzas or 36 burgers. Who has the absolute advantage in making pizzas and who has the absolute advantage in making burgers? Who has the comparative advantage in each activity? Show your derivations. According to the principle of comparative advantage, in which activity should each person (Bob and Erik) specialize in order to gain from trade? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardBecause of the existence of comparative advantage, the total output of goods is higher when each producer?arrow_forwardA) Which producer has the comparative advantage in producing puzzles? Geppetto or Lewis B) Which producer has the comparative advantage in producing puppets? C) If both producers decided to trade with each other to stock their toy stores, which of the following is a range of terms of trade that would benefit both Geppetto and Lewis (1 puppet = x puzzles)? Please explain to me how to solve those questions. Don't just give me the answers. Thank you so much!arrow_forward
- What is the theory of comparative advantage?arrow_forwardTina can produce any of the following combinations of goods X and Y: (a)100X and 0Y; (b) 50X and 25Y, and (c) 0X and 50Y. David can produce any of the following combinations of goods X and Y: (a) 50X and 0Y, (b) 25X and 40Y, and (c) 0X and 80Y. Who has a comparative advantage is in the production of good X? Of good Y? Explain your answer.arrow_forwardCalculating the comparative advantage. Which of the two countries have absolute advantage, and comparative advantage? What is the opportunity cost of the good??arrow_forward
- Economics Today and Tomorrow, Student EditionEconomicsISBN:9780078747663Author:McGraw-HillPublisher:Glencoe/McGraw-Hill School Pub CoEssentials of Economics (MindTap Course List)EconomicsISBN:9781337091992Author:N. Gregory MankiwPublisher:Cengage Learning