AP Macroeconomics - Unit 1: Comparative Advantage

Absolute Advantage

Where a producer makes more of the product (they make more)

Comparative Advantage

Where a producer has a lower opportunity cost of production (they lose less)

Specialization

The idea that it is more efficient and productive to produce goods based on comparative advantage

You can only have _________ advantage in ____ product.

Comparative, One

Input: Comparative Advantage

Input problems compare the opportunity costs based on the input of time or resources, so the one that uses LESS that the other production has the comparative advantage

Output: Comparative Advantage

Output problems compare the opportunity costs based on the amount of production of a good or service, so the one that generates MORE with less goods sacrificed has the comparative advantage