Chapter 18, Problem 10AA

To determine

To show: America has absolute advantage or comparative advantage if it can produce more DVDs per labor than the other countries.

Explanation of Solution

Absolute advantage: It is when a country can produce a higher number of goods & services with the same input costs or the same quantity at a low cost in comparison to the other producers.

Comparative advantage: It is when specific goods & services are produced with lower opportunity cost than other producers which helps them in selling the same product at a lower cost.

Here, as America can produce more DVDs per labor hour than any other country is an absolute advantage for the country in producing the DVDs as it is producing more quantity per labor hour than other countries of the world.