Absolute & Comparative Advantage

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Last updated 6:18 PM on 9/12/26
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6 Terms

1
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What is absolute advantage?

Being able to produce more with the same resources or the same amount with fewer resources.

2
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What is comparative advantage?

Having the lower opportunity cost of producing a good.

3
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Which advantage determines specialization and trade?

Comparative advantage.

4
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Can one person/country have a comparative advantage in both goods?

No

5
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Why does specialization increase economic growth?

 It allows producers to focus on what they have the lowest opportunity cost of producing, increasing total production.

6
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What is the main benefit of trade?

Both parties can potentially consume more than they could without specialization and trade.