Examples of comparative advantage in the following topics:
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- Absolute advantage refers to differences in productivity of nations, while comparative advantage refers to differences in opportunity costs.
- Absolute advantage compares the productivity of different producers or economies.
- Even if one country has an absolute advantage in producing all goods, different countries could still have different comparative advantages.
- Absolute advantage is important, but comparative advantage is what determines what a country will specialize in.
- Country A has an absolute advantage in making both food and clothing, but a comparative advantage only in food.
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- However, the accompanying table shows that Chiplandia has a comparative advantage in computer chip production, while Entertainia has a comparative advantage in the production of CD players.
- It is important to distinguish between comparative advantage and competitive advantage.
- Unlike comparative advantage, competitive advantage refers to a distinguishing attribute of a company or a product.
- In the context of international trade, we more often discuss comparative advantage.
- Chiplandia has a comparative advantage in producing computer chips, while Entertainia has a comparative advantage in producing CD players.
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- The traders decide on whether they should export or import goods depending on comparative advantages.
- Rather than absolute advantage, comparative advantage is the driving force of specialization.
- In sum, the producer that has a smaller opportunity cost will have the comparative advantage.
- It follows that Bob will have a comparative advantage in the production of mustard.
- Tom has the comparative advantage in producing ketchup, while Bob has the comparative advantage in producing mustard.
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- Countries benefit when they specialize in producing goods for which they have a comparative advantage and engage in trade for other goods.
- Trading-partners reap mutual gains when each nation specializes in goods for which it holds a comparative advantage and then engages in trade for other products.
- In other words, each nation should produce goods for which its domestic opportunity costs are lower than the domestic opportunity costs of other nations and exchange those goods for products that have higher domestic opportunity costs compared to other nations .
- Countries benefit from producing goods in which they have comparative advantage and trading them for goods in which other countries have the comparative advantage.
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- Comparative advantage is the ability of one country or region to produce a particular good or service at a lower opportunity cost than another.
- For example, a country where capital and land are abundant but labor is scarce will have comparative advantage in goods that require lots of capital and land, but little labor.
- Trade and comparative advantage are why factor prices are so important in determining what a country produces.
- Trade allows a country to produce only what is comparatively cheaper for them to manufacture because they can get everything else they need through trade.
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- It is important to remember, however, that countries will specialize in goods in which they have a comparative advantage.
- If a country has an absolutely advantage in both skilled and unskilled workers, but a comparative advantage in unskilled workers, the country will specialize in the good that is intensive in the use of unskilled labor.
- The increased returns will go to unskilled workers (they will see their wages increase), even though the country also has an absolute advantage in skilled labor.
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- A country has an absolute advantage in the production of a good when it can produce it more efficiently than other countries.
- Absolute advantage refers to the ability of a country to produce a good more efficiently that other countries.
- Absolute advantage differs from comparative advantage, which refers to the ability of a country to produce specific goods at a lower opportunity cost.
- A country with an absolute advantage can sell the good for less than a country that does not have the absolute advantage.
- Party B has an absolute advantage in producing widgets.
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- Whenever a country has a comparative advantage in production it can benefit from specialization and trade.
- Britain has a comparative advantage in cloth and Portugal in wine .
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- According to the law of comparative advantage, the policy permits trading partners mutual gains from trade of goods and services.
- Reducing barriers to free trade may be politically difficult, but due to the law of comparative advantage, will allow for increased overall surplus for each trading partner in the long run.
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- Planned economies have several advantages.
- Despite these and other problems, market economies come with many advantages, chief among which is speed.