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Differentiate Between Optimization and Compensation and Provide an Example of Each

question 3

Essay

Differentiate between optimization and compensation and provide an example of each.


Definitions:

Specialization

The practice of focusing resources on the production of particular goods or services for which a person or entity has a competitive advantage.

Comparative Advantage

The ability of an individual or country to produce a particular good at a lower opportunity cost than another.

Absolute Advantage

The ability of a party to produce a greater quantity of a good, product, or service than competitors, using the same amount of resources.

Donuts

A type of fried dough confection or dessert food, often sweetened or glazed.

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