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    Differences - Comparative and absolute advantage

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    What is the difference between comparative and absolute advantage? Why is the answer to this question important to managers?

    © BrainMass Inc. brainmass.com October 1, 2020, 8:06 pm ad1c9bdddf

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    Comparative Advantage

    General Theory:

    A country should specialize in products and services in which they have a comparative advantage. They should then trade with another country that has products in which that country has a comparative advantage. In this way both countries become better off.

    Absolute Advantage

    General Theory:

    A country has an absolute advantage economically over another, in a particular good, when it can produce that good more cheaply. A ...

    Solution Summary

    The difference between comparative and absolute advantage is discussed in the solution.