The producer that requires a smaller quantity inputs to produce a good is said to have an absolute advantage in producing that good. … Comparative advantage drives countries to specialize in the production of the goods for which they have the lowest opportunity cost, which leads to increased productivity.

How does absolute and comparative advantage lead to specialization?

The producer that requires a smaller quantity inputs to produce a good is said to have an absolute advantage in producing that good. … Comparative advantage drives countries to specialize in the production of the goods for which they have the lowest opportunity cost, which leads to increased productivity.

What is specialization How is comparative advantage used to determine specialization?

Macroeconomic Specialization

Economies that realize specialization have a comparative advantage in the production of a good or service. Comparative advantage refers to the ability to produce a good or service at a lower marginal cost and opportunity cost than another good or service.

Is specialization based on comparative advantage?

of producing a good is said to have a comparative advantage in producing that good. Comparative advantage determines which country will specialize in which good. The gains from trade are only based on comparative advantage, not on absolute advantage.

Which best describes how producers benefit from specialization?

Which best describes how producers benefit from specialization? Producers can increase their profits.

What is comparative advantage example?

Comparative advantage is what you do best while also giving up the least. For example, if you’re a great plumber and a great babysitter, your comparative advantage is plumbing. That’s because you’ll make more money as a plumber.

What is an example of absolute advantage?

A clear example of a nation with an absolute advantage is Saudi Arabia, The ease with which oil is extracted which greatly reduces the cost of extraction is its absolute advantage over other nations.

What is the best example of specialization?

When an economy can specialize in production, it benefits from international trade. If, for example, a country can produce bananas at a lower cost than oranges, it can choose to specialize and dedicate all its resources to the production of bananas, using some of them to trade for oranges.

What are the types of specialization?

How do you explain comparative advantage?

Comparative advantage is an economy’s ability to produce a particular good or service at a lower opportunity cost than its trading partners. A comparative advantage gives a company the ability to sell goods and services at a lower price than its competitors and realize stronger sales margins.

What is absolute advantage and comparative advantage?

Absolute advantage refers to the uncontested superiority of a country or business to produce a particular good better. Comparative advantage introduces opportunity cost as a factor for analysis in choosing between different options for production diversification.

Which country has a comparative advantage for producing cups?

Agrabah has the absolute advantage in producing cups because 50>20. h. To have comparative advantage means to have lower opportunity cost.

Is it possible to have a comparative advantage in both goods?

A comparative advantage exists when a country can produce goods at a lower opportunity cost compared to other countries. It is not possible for a country to have a comparative advantage in all goods. However, a country can have an absolute advantage in all goods.

Which scenario is the best example of opportunity cost?

The correct answer is a. A computer company produces fewer laptops to meet tablet demand. Opportunity cost defines the benefit obtained by having a commodity after forgoing some other commodity. In the problem statement, the computer company incurs an opportunity cost of laptops for tablets.

How do you determine absolute advantage for a country?

To calculate absolute advantage, look at the larger of the numbers for each product. One worker in Canada can produce more lumber (40 tons versus 30 tons), so Canada has the absolute advantage in lumber. One worker in Venezuela can produce 60 barrels of oil compared to a worker in Canada who can produce only 20.

Which company has a comparative advantage in producing large tubes of toothpaste?

Which company has the comparative advantage in producing large tubes of toothpaste? Mmmmint” it produces the second most, but Fresh!