Concept explainers
The difference between
Explanation of Solution
Comparative advantage refers the ability of a nation to produce goods and services at a lower
Absolute advantage: Absolute advantage refers to the ability to produce a good using fewer inputs than another producer does.
Comparative advantage: Comparative advantage refers to the ability to produce a good at a lower opportunity cost than another producer.
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Chapter 2 Solutions
CONNECT CODE FOR PRINCIPLES OF MACROECO
- The economies of North Korea and India are: different in that North Korea has a command system, while India has a market system. similar in that they are both basically command systems. similar in that they are both basically market systems. different in that India has a command system, while North Korea has a market system.arrow_forwardQ58 Suppose Spain is currently producing 90 units of wine and 10 units of cheese, but to produce 10 more units of cheese it must sacrifice 30 units of wine. Further, suppose that Portugal produces 45 units of wine and 45 units of cheese, but to produce 10 more units of cheese it must sacrifice only 10 units of wine. It can be concluded that... a. More information is needed to conclude anything about comparative advantage in either country. b. Portugal has an absolute advantage in wine production and Spain has an absolute advantage in cheese production. c. Spain has a comparative advantage in the production of wine and Portugal has a comparative advantage in the production of cheese. d. Spain has an absolute advantage in both wine and cheese production. e. Portugal has an absolute advantage in both wine and cheese production.arrow_forwardAccording to the principle of comparative advantage, - countries should specialize in the production of goods for which they use more resources than their trading partners - countries with a comparative advantage in the production of every good need not specialize - countries should specialize in the production of goods for which they have a lower opportunity cost of production than their trading partners - countries should specialize in the production of goods for which they use fewer resources than their trading partnersarrow_forward
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