Because of the Quantity and Quality of Its Resources, the U.S

question 50

Essay

Because of the quantity and quality of its resources, the U.S. has an absolute advantage in the production of many goods and services. Does this imply that the U.S. cannot benefit from trading with a developing country that has less productive ability? Why or why not?

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Definitions:

Average Fixed Cost

The fixed costs of production divided by the quantity of output produced; these costs decline as production increases.

Marginal Cost

The financial cost of producing an extra unit of a good or service.

Average Total Cost

The total cost of production divided by the quantity of output produced.

Average Variable Cost

Represents the cost that varies with the level of output, calculated by dividing the variable costs by the quantity produced.