Question

(Scenario 4-2: Production of Wheat and Toys) Given the information provided, one can determine that Country A has an absolute advantage in ________ and a comparative advantage in the production of ________.

Answer 1

Answer:

wheat, wheat

Explanation:

In the field of economics, absolute advantage may be defined as the ability of a producer to produce a particular goods or services at large amount or quantity at the same price or the same quantity at a very low price as compared to other producers. It means producing goods efficiently.

Whereas a comparative advantage of a product is defined as the ability of a producer to produce more goods and and consumes less of it at a lower opportunity cost when compared to its competitors.

Thus in the context, Country A has both an absolute advantage as well as comparative advantage in production of wheat.