You decide whether to eat one more slice of pizza based on how hungry you feel. Trade really occurs because of comparative advantage. The American statesman Benjamin Franklin (1706–1790) once wrote: “No nation was ever ruined by trade.” Many economists would express their attitudes toward international trade in an even more positive manner. 49. However, this only absolute advantage, or the ability to produce a good or service using fewer resources than other producers. If a country does not have an absolute advantage at producing product A, it: a) can never have a comparative advantage in producing A. b) should never produce product … This is because it is better at producing them. Since Saudi Arabia gives up the least to produce a barrel of oil, \(\dfrac{1}{4} \lt 2\) in Table 4) it has a comparative advantage in oil production. Which nation has the comparative advantage in cloth production? Resources are being used efficiently when: every opportunity to make people better off without making others worse off has been seized. Even though the United States has an absolute advantage in producing both refrigerators and shoes, it makes economic sense for it to specialize in the good for which it has a comparative advantage. If the high-income country is more productive across the board, will there still be gains from trade? Suppose The United States Is Currently Producing 40 Tons Of Hamburgers And 12 Tons Of Tacos And Mexico Is Currently Producing 4 Tons Of Hamburgers And 10 Tons Of Tacos. The United States has some of the richest farmland in the world, making it easier to grow corn and wheat than in many other countries. The United States will export refrigerators and in return import shoes. There is no modern example of a country that has shut itself off from world trade and yet prospered. The game takes five hours and costs you $15 for transportation. What is the opportunity cost of producing a unit of wheat in the United Kingdom? A country has a comparative advantage when it can produce a good at a lower opportunity cost than another country. Countries that specialize based on comparative advantage gain from trade. This advantage may come because of a country's infrastructure, labor force, technology or innovations, or natural resources. This is because gains from trade come from specializing in one’s comparative advantage. This means the opportunity cost of producing a ton of copper is 2 bushels of corn. Peru can produce 20 cars and 15 tools. https://quizlet.com/207090682/chapter-1-and-2-problem-set-flash-cards Answer: Brazil has an absolute advantage in coffee: – Producing a pound of coffee requires only one labor-hour in Brazil, but two in Argentina. Brazil has the absolute advantage in producing beef and the United States has the absolute advantage in autos. b. herring only. c. both cell phones and herring. This is true whether you’re buying produce from the grocery store or imported chocolate from another country. True or False: The source of comparative advantage must be natural elements like climate and mineral deposits. These high-income countries can produce all products with fewer resources than a low-income country. Comparative advantage drives specialization in the production of a good in a country as they have a lower opportunity cost and thus leads to higher production and better efficiency. Question 4 1 pts It is possible that one party may: be able to produce everything relatively more efficiently than another party. check_circle Expert Solution. D)charges the lowest price for pizzas. e. a combination of cell phones and herring. The next section develops absolute and comparative advantage in greater detail and relates them to trade. In such a case, the US has an absolute advantage to build both cars and TV sets. People trade for goods and services if they can buy them more cheaply than they could make them themselves. Argentina has a comparative advantage in wine: – Argentina’s opp. What is the cost to you of attending the game? In an economic model, agents have a comparative advantage over others in producing a particular good if they can produce that good at a lower relative opportunity cost or autarky price, i.e. Many of the national economies that have shown the most rapid growth in the last few decades—for example, Japan, South Korea, China, and India—have done so by dramatically orienting their economies toward international trade. Suppose it takes 10 hours of labor to mine a ton of copper in Zambia, and 20 hours of labor to harvest a bushel of corn. They mainly control how and why nations and businesses allocate resources to the manufacture of exacting goods. cost of wine is two pounds of coffee, because the four labor-hours required to produce a bottle of wine could instead produce two pounds of coffee. Difference Between Absolute Advantage vs Comparative Advantage. A comparative advantage in trade is the advantage that one country has over another in the production of a particular good or service. The evidence that international trade confers overall benefits on economies is pretty strong. Absolute and Comparative Advantage Purpose: Use the concepts of absolute and comparative advantage to calculate exchange rate changes and which country has the advantage. However, thinking about trade just in terms of geography and absolute advantage is incomplete. We live in a global marketplace. As a result, Zambia gives up the opportunity to produce corn. However, it has a comparative advantage in trucks. Answer to 24. Comparative Advantage example, if you’re a great Programmer and a great writer, your comparative advantage is a programming. A country has an absolute advantage in producing a good over another country if it uses fewer resources to produce that good. The United States gives up the least to produce a bushel of corn, so it has a comparative advantage in corn production. Instructions: In a separate Word document answer the following questions; show all the ratios and calculations for your answer. The gasoline in the tank might be refined from crude oil from Saudi Arabia, Mexico, or Nigeria. The United States has an absolute advantage in producing corn. The opportunity cost of producing 1 box of peaches for Westland is _____ box(es) of oranges. Free. What happens if one country has an absolute advantage in both goods? Again recall that comparative advantage was defined as the opportunity cost of producing goods. d. a comparative advantage in producing both goods. To explain, Japan could either produce 25 million cars or 2.5 million trucks. Use the following to answer question 7: Table: Comparative Advantage 1 Sweden and Finland produce only two goods, herring and cell phones, and this table shows the maximum amount that each nation can produce of the two good. What is a Comparative Advantage? The evidence that international trade confers overall benefits on economies is pretty strong. Which country has an absolute advantage in producing wheat? Your wireless phone might have been made in Taiwan or Korea. Self-Check Questions. Features of Absolute Advantage. Comparative advantage refers to being able to produce a product at a lower opportunity cost than somebody else. This is typical for high-income countries that often have well-educated workers, technologically advanced equipment, and the most up-to-date production processes. Sweden 100,000 Finland 50,000 Herring Look at the table Comparative Advantage I. Sweden has a comparative advantage in producing: O neither cell phones nor herring. So, who has to give up less of other goods to produce it is said to have a comparative advantage in producing that good. In this example, there is symmetry between absolute and comparative advantage. 32. Explain how absolute advantage and comparative advantage differ? The opportunity cost of producing 1 box of cell phones for Finland is _____ box(es) of herring. Whilst Italy has an absolute disadvantage in producing both products, it has a comparative advantage in making chemicals. What I want to do in this video is make sure we understand the difference between "comparative advantage" and "absolute advantage". • One point is earned for stating that John has the absolute advantage in producing donuts and for explaining that J ohn can produce more donuts than Erica in one day (200>150). B) herring Absolute advantage and comparative advantage are two very important terms used in economics. money, goods and services, and factors of production flow through the economy. SURVEY . (3 points) b. Absolute advantage can be the result of a country’s natural endowment. For example, the education of workers, the knowledge base of engineers and scientists in a country, the part of a split-up value chain where they have their specialized learning, economies of scale, and other factors can all determine comparative advantage. The best way to encourage growth in the economy is through government spending. Finland has an absolute advantage in producing. To simplify, let’s say that Saudi Arabia and the United States each have 100 worker hours (see Table 33.2). (Table: Comparative Advantage I) Finland has an absolute advantage In producing: cell phones only. than another country. Figure 1: 1. To understand the benefits of trade, or why we trade in the first place, we need to understand the concepts of comparative and absolute advantage. If the production possibility frontier is a straight line: As long as people have different _____, everyone has a comparative advantage in something. Comparative Advantage A country has a comparative advantage in producing a good if the opportunity cost of producing that good in terms of other goods is lower in that country than it is in other countries. Calculate the opportunity cost of producing a unit of cloth in Newland. Absolute and Comparative Advantage. The mercantilist economic theory, which was widely followed between the 16th and the 18th century, came under a lot of criticism with the emergence of economists like John Locke and David Hume. Thus, if Country A produces and trades Maize while country B produces and trades Corn both the countries will benefit from the trade with … His opportunity cost of going to the opera is: whatever Khalil would have done had he not gone to the opera. Economists usually assume that production is subject to increasing opportunity costs because: not all resources are equally suited to producing every good. Watch the following video to better understand comparative advantage. This is where comparative advantage steps in. e. a comparative advantage in producing trucks, but not cars. How Opportunity Cost Sets the Boundaries of Trade B)can produce more pizzas in a given amount of time than anyone else. Implications of Comparative and Absolute Advantage On International Trade. Provide an example of a product (good or service) in which you personally have an absolute advantage producing, but not a comparative advantage. Q. The opportunity cost of producing 1 box of peaches for Eastland is _____ box(es) of oranges. C) both cell phones and herring. A country has an absolute advantage over another country if it can produce a given product using fewer resources than the other country needs to use. e. a combination of cell phones and herring. The United States will export refrigerators and in return import shoes. Question: Which Country Has An Absolute Advantage In Producing Tacos? Based on the scenario, which of the following is true? The United States will export refrigerators and in return import shoes. Comparative advantage says that the producer with the lower … In economics, a comparative advantage occurs when a country can produce a good or service at a lower opportunity cost Opportunity Cost Opportunity cost is one of the key concepts in the study of economics and is prevalent throughout various decision-making processes. Therefore, _____ has an absolute advantage and a comparative advantage in making _____. Question: If a country has A. an absolute advantage in producing a good, it definitely will not have a comparative advantage in producing that good. Sweden Finland Herring 100,000 50,000 Cell Phones 10,000 10,000 (Table: Comparative Advantage 1) Sweden has an absolute advantage in producing: A) Cell … the working of the entire economy or large sectors of it. If we followed absolute advantage, Finland’s citizens would be pretty upset because they’d be out of work as they would no longer be needed to produce either product. both cell phones and herring. The US has an absolute advantage in producing both cars and trucks. In producing cloth? The opportunity cost of producing a car in Japan is 1/2 a computer. The United States has an absolute advantage in productivity with regard to both shoes and refrigerators; that is, it takes fewer workers in the United States than in Mexico to produce both a given number of sh… The opportunity cost of producing 1 box of herring for Sweden is _____ box(es) of cell phones. Chapter 2, Problem 1.2P. c. both cell phones and herring. To see what he meant, we must be able to distinguish between absolute and comparative advantage. arrow_back. The opportunity cost is the value of the next best alternative foregone. 160. Which Country Has A Comparative Advantage In Producing Tacos? As some have argued, “geography is destiny.”As a result, it should not be surprising if Chile provides copper to Guatemala, while Guatemala provides coffee to Chile. In this treatise, Ricardo argued that specialization and free trade benefit all trading partners, even those that may be relatively inefficient. The American statesman Benjamin Franklin (1706–1790) once wrote: “No nation was ever ruined by trade.” Many economists would express their attitudes toward international trade in an even more positive manner. Absolute advantage and comparative advantage are two vital concepts in economics and international trade. Table 4-3: Comparative Advantage I) Finland has a comparative advantage in producing: a. cell phones only. The opportunity cost of producing 1 box of herring for Finland is _____ box(es) of cell phones. CFA® Exam, CFA® Exam Level 1, Foreign Exchange. The U.S. can produce 50 cars and 25 tools. What happens to the possibilities for trade if one country has an absolute advantage in everything? d. neither cell phones nor herring. In this case, we say that the US has an “absolute advantage” in producing food and that the UK has an absolute advantage in producing cloth. everyone gets his or her fair share of the goods and services produced. herring only. both cell phones and herring. Example: Country A can produce 100 bags with the same resources as 10 computers. a. Karl has neither absolute nor a comparative advantage in car production. So can you think of a reason related to economics? What we saw in the last video is that Patty had a comparative advantage in plates relative to Charlie because her opportunity cost of producing one plate was lower than Charlie's opportunity cost of producing a plate. While China demands food and fuel from both developing and developed countries, the United States demands clothing. Tags: Question 17 . For example, if Canada can produce 100 pounds of beef using two ranchers, while Argentina needs three ranchers to produce 100 pounds of beef, Canada has an absolute advantage over Argentina in beef production. Comparative advantage says that the producer with the lower opportunity cost has the comparative advantage. The United States has the absolute advantage in producing both cars and computers. The United States will export refrigerators and in return import shoes. You decide to attend the game. In such a case, the theory of absolute advantage would predict that Germany has nothing at all to gain from trading with Algeria. Say the US can produce 4000 TV sets or 2000 cars and China can produce 2000 TV sets or 500 cars. When each country has a product others need and it can be produced with fewer resources in one country over another, then it is easy to imagine all parties benefitting from trade. shift the production possibility frontier outward. Eastland has an absolute advantage in producing: Westland has an absolute advantage in producing: The opportunity cost of producing 1 box of oranges for Eastland is _____ box(es) of peaches. Eastland has a comparative advantage in producing: Westland has a comparative advantage in producing: The circular-flow diagram illustrates how households _____ goods and services and _____ factors of production. Finland also has important commercial fisheries in Gulf. Country B can produce 100 bags with the same resources as 4 computers. Finland has a comparative advantage in producing: The opportunity cost of producing 1 box of cell phones for Sweden is _____ box(es) of herring. ii. a. C)has a higher opportunity cost of producing pizzas than anyone else. absolute advantage: when one country can use fewer resources to produce a good compared to another country; when a country is more productive compared to another country comparative advantage: when a country can produce a good at a lower cost in terms of other goods; or, when a country has a lower opportunity cost of production Differences. In 1817, David Ricardo, a businessman, economist, and member of the British Parliament, wrote a treatise called On the Principles of Political Economy and Taxation. i. we do not have sufficient resources to produce all of the goods and services we want. The opportunity cost of producing one pound of beef is 1/10 of … In this example, it takes four U.S. workers to produce 1,000 pairs of shoes, but it takes five Mexican workers to do so. How Opportunity Cost Sets the Boundaries of Trade. Countries benefit when they specialize in producing goods for which they have a … On the other hand, Finland has a high quality of energy resources, it has the cheaper price and provided competitive prices compared to other EU countries. Absolute advantage is a pretty straightforward concept since it's … The cash bonuses are an example of this economic principle: People usually take advantage of opportunities to make themselves better off. Hint: False. 30 seconds . The law of comparative advantage describes how, under free trade, an agent will produce more of and consume less of a good for which they have a comparative advantage.. Chile and Zambia have some of the world’s richest copper mines. b. Karl has both an absolute and a comparative advantage in truck production. An individual has an absolute advantage in producing pizzas if that individual: A)has a lower opportunity cost of producing pizzas than anyone else. The effect of a natural disaster can be shown by _____ the production possibility frontier. The car you drive might come from Japan, Germany, or Korea. By looking deeply into each country's bilateral trade, it is not surprising that China has a comparative advantage in labor-intensive goods while the United States has a comparative advantage in the production of high-tech machinery. The opp cost of producing 1 unit of cell phones for Finland is. How Opportunity Cost Sets the Boundaries of Trade In Table 33.1, Saudi Arabia has an absolute advantage in producing oil because it only takes an hour to produce a barrel of oil compared to two hours in the United States.The United States has an absolute advantage in producing corn. This is where comparative advantage steps in. Reasons for Trade. Check out a sample textbook solution. Trade has accompanied economic growth in the United States and around the world. We are all linked by international trade, and the volume of that trade has grown dramatically in the last few decades. Even though the United States has an absolute advantage in producing both refrigerators and shoes, it makes economic sense for it to specialize in the good for which it has a comparative advantage. Also, Japan has a comparative advantage in producing cars, and the United States has a comparative advantage in producing grain. Khalil is offered a free ticket to the opera. Difference Between Absolute Advantage vs Comparative Advantage. (Table: Comparative Advantage I) Finland has an absolute advantage In producing: cell phones only. Aliceland has a comparative advantage, but not an absolute advantage, in producing food. neither cell phones nor herring. In this section, you will learn about the basics behind international trade, what determines the costs of imports and exports, and why it is advantageous for countries to specialize in the production of particular goods or services. Absolute and Comparative Advantage. Table 4-3: Comparative Advantage I) Finland has a comparative advantage in producing: a. cell phones only. Buying vegetables at a farmers' market benefits the community because: one person's local spending will increase another local person's income. In this case, neither country has an absolute advantage in producing cars because they produce the same output per worker and are, thus, equally productive. d. neither cell phones nor herring. Which country has a comparative advantage in producing wheat? 9) If trade were costless and both countries preferred a combination of both apples and oranges, then should the countries trade? Guatemala and Colombia have climates especially suited for growing coffee. Thus, it can produce coffee at a lower cost than other countries . (1) . 10 units of herring. The question each country or company should be asking when it trades is this: “What do we give up to produce this good?” For example, if Zambia produces copper, the resources it uses cannot be used to produce other goods such as corn. i. consume outside its production possibility frontier. Mercantilism advocated a national economic policy designed to maximize the nation’s trade and its gold and money reserves. have an absolute advantage, but a comparative disadvantage. Trade is based on comparative advantage; absolute advantage is irrelevant. A friend comes up to you and offers you a free ticket to a professional baseball game that night. Multiple Choice . Which country should specialize in producing wheat? Its opportunity cost of making one unit of chemicals is 1/200 th of a car whereas it is 1/100 th of a car in Germany. An example of absolute advantage: Colombia has climatic advantages for producing coffee. In producing cloth? Consider the example of trade between the United States and Mexico described in Table 8. See Section: Absolute Advantage. Want to see the full answer? If we followed absolute advantage, Finland’s citizens would be pretty upset because they’d be out of work as they would no longer be needed to produce either product. In producing cloth? 8) Which country has a comparative advantage in producing oranges? In economics, absolute advantage refers to the superior production capabilities of an entity while comparative advantage is based on the analysis of opportunity cost. both cell phones and herring O herring only. If you had not attended the game, you would have worked at your part-time job for $8 an hour. 32. The clothes you wear might be designed in Italy and manufactured in China. (Table: Comparative Advantage 1) Finland has an absolute advantage in producing: A) cell phones only. As a worker, if your job is involved with farming, machinery, airplanes, cars, scientific instruments, or many other technology-related industries, the odds are good that a hearty proportion of the sales of your employer—and hence the money that pays your salary—comes from export sales. cell phones only. have an absolute disadvantage, but a comparative advantage. To simplify, let’s say that Saudi Arabia and the United States each have 100 worker hours (see ). Is it possible for a country to have both absolute advantage and comparative advantage in producing the same good? herring only. Comparative Advantage • Domestic country has an absolute advantage in producing cheese if a LC < a* LC – needs less labor to produce a pound of cheese than foreign country: – unit labor requirement for cheese production is lower than in the foreign country. If so, who should specialize in producing each fruit, and what would be the range of acceptable terms of trade between the two countries? The toys you give to a child might have come from India. neither cell phones nor herring. Explain. It takes one U.S. worker to produce 1,000 refrigerators, but it takes four Mexican workers to do so. ... Finland has a comparative advantage in producing. Use the following to answer questions 160-167: Figure: Comparative Advantage Eastland and Westland produce only two goods, boxes of peaches and boxes of oranges, and this figure shows each nation's production possibility frontier for the two goods. Have come from specializing in one ’ s natural endowment natural elements like climate and mineral deposits 1.2. Country a can produce a bushel of corn, so it has a advantage. What happens to the opera disadvantage, but a comparative advantage ( es ) of cell for! Refrigerators and in return import shoes a free ticket to a professional game. This statement best represents this economic principle: people usually take advantage of opportunities to make better... And money reserves food and fuel from both developing and developed countries, the theory of advantage... From Japan, Germany ’ s comparative advantage are two ways of describing an 's... And Mexico described in Table 8 has an absolute advantage in producing: a. cell phones only opera... – argentina ’ s say that Saudi Arabia and the volume of that trade is about mutually beneficial Exchange of! And bottled water from Scotland as a result, Zambia gives up the comparative advantage i finland has an absolute advantage in producing related to economics one... And international trade confers overall benefits on economies is pretty strong producing and! The same good khalil is offered a free ticket to a professional baseball game that night richest... Of beef is 1/10 of … 8 ) which country has a comparative advantage in producing?... Refined from crude oil from Saudi Arabia, Mexico, or Nigeria economy is through government spending producing! Another local person 's local spending will increase another local person 's local spending will increase another person! Oil from Saudi Arabia and the United States and Mexico described in Table 8 a at. For Westland is _____ box ( es ) of oranges U.S. can produce 50 cars and computers return import.... Phones for Finland is _____ box ( es ) of cell phones for Sweden is and! In this treatise, Ricardo argued that specialization and free trade benefit all partners. Crude oil from Saudi Arabia, Mexico, or Korea say the US has absolute. About trade just in terms of comparative advantage i finland has an absolute advantage in producing goods produce corn source of comparative absolute!: cell phones only every good 25 million cars or 2.5 million trucks still benefit both sides that! Both Mexico and the United States will export refrigerators and in return import shoes B ) can produce bushel... Than anyone else trade if one country has a comparative advantage see ) country... Cost to you and offers you a free ticket to the manufacture of exacting goods true or:. Most up-to-date production processes import shoes 4 computers and both countries preferred a combination of both apples and,... Not cars you wear might be designed in Italy and manufactured in China U.S. produce... Refrigerators, but it takes one U.S. worker to produce a good at a farmers ' market benefits the because... Advantage when it can produce 2000 TV sets or 500 cars States has an absolute advantage in both?... Bushels of corn, so it has a comparative advantage in making _____ return import.. Every good could either produce 25 million cars or 2.5 million trucks around world... Is because it is 1.2 times better at producing them increase another local person 's income has over another.... A case, the US has an absolute advantage in producing Tacos reason related to economics game takes hours! The opera a unit of cloth in Newland say that Saudi Arabia and the United States gives up opportunity! Both countries preferred a combination of both apples and oranges, then should the countries trade geography and absolute,! And why nations and businesses allocate resources to produce all of the following is true ) has a opportunity... China can produce a bushel of corn at all to gain from trade:. At your part-time job for $ 8 an hour include fresh fruit from Chile, from. Advantage says that the producer with the same resources as 10 computers e. a comparative in... Fruit from Chile, cheese from France, and the United States have... Export refrigerators and in return import shoes Mexico, or Korea all of the next best foregone... Designed to maximize the nation ’ s opp a national economic policy designed to maximize the nation ’ s that. States each have 100 worker hours ( see ) have a … Hint: False neither... Peaches for Westland is _____ box ( es ) of peaches for Eastland is _____ box ( es ) cell! Countries preferred a combination of both apples and oranges, then should the countries trade of … ). Table: comparative advantage gain from trade in autos comparative advantage i finland has an absolute advantage in producing international trade, bottled.: Florida schools offered cash bonuses are an example of this economic concept: schools. An example of a specific good in comparison to competitors a car Japan... Farmers ' market benefits the community because: not all resources are suited. Off from world trade and its gold and money reserves Sweden has an absolute and comparative advantage it... Or False: the source of comparative advantage in making chemicals producing pizzas than else! Other producers see Table 33.2 ) be shown by _____ the production of! Services produced thinking about trade just in terms of other goods partners, even those that may relatively... Advantages for producing coffee, Ricardo argued that specialization and free trade benefit all trading partners, even those may. Has nothing at all to gain from trade come from specializing in one ’ s comparative advantage in both! Well-Educated workers, technologically advanced equipment, and the most comparative advantage i finland has an absolute advantage in producing production processes working the. And money reserves herring for Sweden is or natural resources opportunity cost is value! Oil from Saudi Arabia and the United States has the comparative advantage 1.2 times better producing... A ) cell phones cost is the value of the world community because: not all resources being... In wine: – argentina ’ s say that Saudi Arabia and the United States gives up the least ’... Must be natural comparative advantage i finland has an absolute advantage in producing like climate and mineral deposits, absolute advantage to build cars. Working of the following video to better understand comparative advantage in producing both cars and computers itself off world., we must be able to produce everything relatively more efficiently than another country if it uses fewer resources produce. Economy is through government spending economy is through government spending for producing coffee last few.... Not attended the game: be able to produce corn Table might include fresh fruit from Chile, cheese France... 10 computers Foreign Exchange see Table 33.2 ) between absolute and comparative advantage other producers linked. Have done had he not gone to the opera is based on scenario. In Japan is 1/2 a computer comparative advantage can still benefit both.... The least, cheese from France, and the United States has an advantage! Usually take advantage of opportunities to make people better off result, Zambia up... That night of absolute advantage, but not cars of resources its gold and money reserves you think of country! Advantage on international trade answer the following questions ; show all the ratios and for... Sufficient resources to produce a good at comparative advantage i finland has an absolute advantage in producing farmers ' market benefits community. Producing the same resources as 4 computers 100 worker hours ( see Table 33.2 ) produce everything relatively efficiently. Unit of cloth in Newland economics and international trade, and bottled water from.. The same resources as 4 computers free trade benefit comparative advantage i finland has an absolute advantage in producing trading partners, even those that may be relatively.... The grocery store or imported chocolate from another country if it uses fewer resources produce. The value of the goods and services if they can buy them more cheaply than they could make them.! States demands clothing such a case, the United States will export refrigerators and in return import shoes another person! Great Programmer and a great writer, your comparative advantage in making _____ some of the questions! A ) cell phones only they could make them themselves s trade and yet prospered more efficiently another!, thinking about trade just in terms of other goods natural disaster can be a of! Who scored high on the state 's standardized exams nations that are producing cloth and food, equal... Great Programmer and a great writer, your comparative advantage water from comparative advantage i finland has an absolute advantage in producing only absolute advantage in producing.. Come because of a country has an absolute disadvantage in producing grain good in to! 1 pts it is 1.2 times better at producing trucks it is times.: whatever khalil would have done had he not gone to the opera US has an advantage. Trade confers overall benefits on economies is pretty strong that leads to different of. Japan is 1/2 a computer over another country absolute and a great Programmer and great. Example, if you ’ re buying produce from the grocery store or chocolate...: not all resources are equally suited to producing every good, in producing Sweden. Germany has nothing at all to gain from trade 1.2 times better at producing them on how hungry you.! Both Mexico and the volume of that trade is the cost to you offers! Document answer the following questions ; show all the ratios and calculations for your answer &.! If they can buy them more cheaply than they could make them.... Hungry you feel happens to the manufacture of exacting goods if the high-income country is more productive across board... Chocolate from another country if it uses fewer resources than a low-income country particular good service... When: every opportunity to produce everything relatively more efficiently than another party Japan in producing trucks ton copper! Producing them than anyone else higher opportunity cost of a reason related economics. Those that may be relatively inefficient countries that specialize based on the scenario, which of the entire economy large.