Quick Answer: Which Country Has An Absolute Advantage?

What country has an absolute advantage in coffee production?

BrazilAnswer : Brazil has an absolute advantage in coffee: – Producing a pound of coffee requires only one labor-hour in Brazil, but two in Argentina..

What is an example of a comparative advantage?

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.

Can a country have a comparative advantage without an absolute advantage?

In economic terms, a country has a comparative advantage when it can produce at a lower opportunity cost than that of trade partners. While a country cannot have a comparative advantage in all goods and services, it can have an absolute advantage in producing all goods.

What does Canada specialize in producing?

Canada is a world leader in the production of many natural resources such as gold, nickel, uranium, diamonds, lead, and in recent years, crude petroleum, which, with the world’s second-largest oil reserves, is taking an increasingly prominent position in natural resources extraction.

What is the United States absolute advantage?

The United States has an absolute advantage in productivity with regard to both shoes and refrigerators; that is, it takes fewer workers in the United States than in Mexico to produce both a given number of shoes and a given number of refrigerators.

Who has absolute advantage?

Absolute advantage and comparative advantage are two concepts in economics and international trade. Absolute advantage refers to the uncontested superiority of a country or business to produce a particular good better.

Does Canada have an absolute advantage?

For example, if Canada can produce 100 pounds of beef using two ranchers, while Argentina needs three ranchers to produce 100 pounds of beef, Canada has an absolute advantage over Argentina in beef production. Absolute advantage can be the result of a country’s natural endowment.

Is it true that a country needs to have an absolute advantage in the production of a good in order to benefit from trade in that good?

If a nation has an absolute advantage in the production of a good, it can produce that good using fewer resources than its trading partner. If a nation has a comparative advantage in the production of a good, it can produce that good at a lower opportunity cost than its trading partner.

What country has a comparative advantage?

A country is said to have a comparative advantage in whichever good has the lowest opportunity cost. That is, it has a comparative advantage in whichever good it sacrifices the least to produce. In the example above, Switzerland has a comparative advantage in the production of chocolate.

Which country has the absolute advantage in producing dates?

Which country has the ABSOLUTE advantage in producing DATES? Italy and Libya produce grain and dates.

Can there be no absolute advantage?

It is possible for an economy to have an absolute advantage in everything. Whilst, some countries may have no absolute advantage in any goods or services.

What are the assumptions of absolute advantage?

The Absolute Advantage Theory theory assumed that only bilateral trade could take place between nations and only in two commodities that are to be exchanged. This assumption was significantly challenged when the trade, as well as the needs of nations, started increasing.

How do you find absolute advantage?

Make a table like Table 19.6.To calculate absolute advantage, look at the larger of the numbers for each product. … To calculate comparative advantage, find the opportunity cost of producing one barrel of oil in both countries.More items…

Which country has absolute advantage in lumber Why?

CanadaOne 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.

What is the difference between comparative advantage and absolute advantage?

Key Takeaways. Absolute advantage is achieved when one producer is able to produce a competitive product using fewer resources, or the same resources in less time. Comparative advantage considers the opportunity cost when assessing the viability of a product, accounting for alternative products.

What is absolute cost theory?

Adam Smith propounded the theory of absolute cost advantage as the basis of foreign trade; under such circumstances an exchange of goods will take place only if each of the two countries can produce one commodity at an absolutely lower production cost than the other country. …

Does Germany have an absolute advantage?

A country has an absolute advantage if it can produce something more efficiently than another country. Germany is better than making beers than Italy, so it has an absolute advantage in brewing.

Can two countries have absolute advantage?

By Smith’s argument, specializing in the products that they each have an absolute advantage in and then trading the products, can make all countries better off, as long as they each have at least one product for which they hold an absolute advantage over other nations.

What does it mean when a country has an absolute advantage?

An absolute advantage is when one country can make something at a lower cost than another. Comparative advantage is when a nation can make something at a lower opportunity cost than another. Consider this example: … Country A has an absolute advantage for both products.

What is China’s comparative advantage?

The model predicts that China has a comparative advantage in heavy goods in nearby markets, and lighter goods in more distant markets. This theory motivates a simple empirical prediction: within a product, China’s export unit values should be increasing in distance.

Which country has the absolute advantage in bananas?

Honduras2 Point-Honduras has an absolute advantage in bananas 1 Points-Explanation: Since they can produce more output with the same resources they have an absolute advantage.