Question

Which describes a way in which consumers most likely benefit from producers’ absolute advantage?

Answer 1

Consumer’s most likely benefit from producers’ absolute advantage is when prices decrease as a result of increased production efficiencies.  

Further Explanation:-

Absolute Advantage refers to a situation when an individual, business or company produces more of a good or service than any other producer with same quantity of resources. If we talk about United States in particular then it has workforce that is well skilled along with that it has natural resources added with technological advancement and because of availability of all these three things, United States has ability to produce many goods which can produce goods more effectively than other trading partners and that gives a upper hand with regards to production.  For example, there are two car manufacturing companies named as A and B. A manufactures 30 cars per day whereas B manufactures around 25 cars per day. The reason behind this difference is the ‘Workforce’ both these companies have. There are around 100 people working in company A and on the other hand 80 workers are there working in company B. Both these car manufacturing companies have same quality standards, but due to A having advantage of workforce, It gets absolute advantage over B.

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Answer Details:

Grade – High School

Subject – Economy

Chapter – Absolute Advantage

Keywords –Absolute Advantage, Quantity, Workforce, Partners, Trading, United States, Upper Hand, Production, Companies, Quality, Standards, Ability

Answer 2

The correct answer is B.

When producers develop an absolute advantage, they are able to manufacture products or services more efficiently that the competitors. This means they are able to produce a larger quantity of output with the same amount of inputs than the competitors, or the same level of output with fewer inputs.

When a production process becomes more efficient, there is a cost reduction and manufacturers are able to decrease the market prices of the products and, in consequence, to increase their sales and profits. Hence. due to the price reduction, competitiveness constitutes a benefit for consumers too, as they can purchase the same products at a cheaper price.