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Comparative and Absolute Disadvantage

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Illustrate, using a hypothetical scenario (data), how a nation could have an absolute disadvantage in the production of two goods and could still have a comparative advantage in the production of one of them.

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Solution Preview

This is the whole reasoning behind comparative advantage.

Country A produces Good X for 3, Good Y for 6

Country B produces Good X for 4, ...

Solution Summary

Can a country has comparative advantage even if it is absolutely disadvantaged in all of its goods? This answer says yes, that's the essence of comparative advantage.

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