Explain the Difference Between Absolute Advantage and Comparative Advantage

question 99

Essay

Explain the difference between absolute advantage and comparative advantage. Which is more important in determining trade patterns, absolute advantage or comparative advantage? Why?

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Definitions:

Opportunity Cost

The cost associated with the best foregone choice because of a decision.

Machinery

A category of physical hardware used in the production process, including tools, engines, and devices that perform various tasks.

Sweaters

Knitted garments intended to cover the torso and arms, providing warmth and fashioned from materials like wool, cotton, or synthetic fibers.

Comparative Advantage

The ability of a country, company, or individual to produce a particular good or service at a lower opportunity cost than others, leading to more efficient trade and production.