We consider two countries A and B in a hypothetical investment scenario. We first consider absolute advantage. Country A can produce 5 tons of wheat every month using 3 employees. Country B can produce 8 tons of wheat every month using 3 employees. If we assume that the employees of both the countries are paid equally, Country B has an absolute advantage over Country A in producing wheat every month. The principle of absolute advantage is that it refers to the ability of an ...
The answer to this problem explains the difference between absolute advantage and comparative advantage. The references related to the answer are also included.
Comparative and Absolute Advantage
What is the difference between comparative and absolute advantage? Why is the answer to this question important to managers?View Full Posting Details