Foreign sectoe

What is Absolute advantage?

• is a key economic principle that explains how trade can be beneficial even if one party is less efficient in producing all goods compared to another party

• If both countries specialize according to their comparative advantages and trade with each other, they can both end up with more of both goods than if they tried to produce both goods independently

• is an economic concept that refers to the ability of a person, company, or country to produce more of a good or service than competitors using the same amount of resources

What is comparative advantage?

• Comparative advantage occurs when an individual, company, or country can produce a good or service at a lower opportunity cost than others

• If both countries specialize according to their comparative advantages and trade with each other, they can both end up with more of both goods than if they tried to produce both goods independently

• is an economic concept that refers to the ability of a person, company, or country to produce more of a good or service than competitors using the same amount of resources

Which country has the absolute advantage in producing glasses?

• United States

• China

• Both

Which country has the absolute advantage of producing chairs?

• United States

• China

• Both

Who has the comparative advantage in producing Pies?

• David 3/2 cakes

• William 1/2 cakes

Who has the comparative advantage in producing cakes?

• William 2 pies

• David 3/2 pies