a) Advantage

• comparative advantage

• when a nation can specialise at a lower opportunity cost than other nations

• a nation with a comparative advantage should…

• export excess production

• and import goods/services not produced

• absolute advantage

• when a nation can produce a good/service using less production factors than other nations

• the assumptions of having a comparative advantage

• zero transport costs

• perfect information

• factor mobility

• constant production costs

• the purpose of assuming zero transport costs

• firms always have the money to trade

• the purpose of assuming perfect information

• nations know each others and their own comparative advantages

• the purpose of assuming factor mobility

• firms always have the resources to specialise

• the purpose of assuming constant production costs

• firms always have the money to specialise

• state the limitations of having a comparative advantage

• foreign dependency

• structural unemployment

• negative externalities of production