Question

The primary difference between absolute and comparative advantage is A. absolute advantage refers to the ability to produce more of a good or service using the same amount of resources and comparative advantage refers to the ability to produce a good or service at a lower opportunity cost. B. absolute advantage is a concept that was utilized in communist countries and comparative advantage is a capitalist idea. C. absolute advantage can never change while comparative advantage depends on the relative cost of a​ good's resources. D. absolute advantage refers to the ability to produce a good or service at a lower opportunity cost and comparative advantage refers to the ability to produce more of a good or service using the same amount of resources.

Answer 1

Answer:

A. absolute advantage refers to the ability to produce more of a good or service using the same amount of resources and comparative advantage refers to the ability to produce a good or service at a lower opportunity cost.

Explanation:

Let's assume there are two countries, x and y.

X produces 10 cheese and 10 bottles of wine while Y produces 6 cheese and 3 bottles of wine. Country x has an absolute advantage in the production of wine and cheese because it produces higher quantities of both goods when compared to country y.

Country x has a comparative advantage in the production of wine because its opportunity cost (1) is lower than the opportunity cost of country y (2).

Country y has a comparative advantage in the production of cheese because its opportunity cost (1/2) is less than that of country x (1).

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