Using at least your textbook and a minimum of three additional sources, answer the following questions. Your paper should be at least three pages in length, excluding title and reference pages. Follow APA style guidelines.
Daniels, J. D., Radebaugh, L. H., & Sullivan, D. P. (2015). International business: Environments and operations (15th ed.). Upper Saddle River, NJ: Pearson Education.
Absolute and Comparative Advantage
The concept of absolute advantage suggests that different countries produce some products more efficiently than other countries. As a result, global efficiency can be increased by taking advantage of particular efficiencies by country and encouraging international free trade (Daniels, Radabaugh, & Sullivan, 2015). This is similar to scientific management: labor becomes more skilled by performing the same tasks repeatedly, and there are cost savings in buying and producing larger quantities. Absolute advantage evolves as a result of "resource base, country size, and technology or resource efficiencies" (Daniel, Radabaugh, & Sullivan, 2015, p. NEED PAGE NUMBER). Comparative advantage refers to the gains a country experiences by specializing in producing particular products efficiently, regardless of whether or not other countries can also produce these same items even more efficiently. In other words, even if a country cannot produce a product at the lowest price possible they still may benefit by virtue of producing the product efficiently.
In Table 1, Spain has the absolute advantage for producing both boats and trucks. Spain is able to produce more of each product. While the table does not show the costs involved in making the vehicles, it is assumed that Spain has acquired efficiencies that allow it to produce a greater quantity of these items than Portugal. Portugal has the comparative advantage for producing boats. One could calculate the opportunity cost. The citizens of each country can not produce both goods simultaneously; they must choose which to produce. They must determine which product offers the most opportunity for ...
This detailed solution answers the questions in Daniels, Radabaugh, & Sullivan's text about comparative and absolute advantage for Spain, Portugal, Greece and Italy. It also discusses opportunity costs and students. Includes APA formatted essay and intent citations.