Question

The United States buys bananas from Ecuador because it is more expensive for the United States to grow them.

Answer 1

The situation that has been created is Ecuador has a comparative advantage over the United States.

What is comparative and absolute advantage?

A country has comparative advantage in production if it produces at a lower opportunity cost when compared to other countries. This means that a country has a comparative advantage in the production of a good if it is cheaper to produce the good in that country when compared to other countries.

A country has absolute advantage in the production of a good or service if it produces more quantity of a good when compared to other countries

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