What is absolute advantage?

Question

BlackTom AI · Accepted Answer

Question restatement: What is absolute advantage?
Options:
 a. An advantage a country has when they are able to produce a product at a lower opportunity cost than another country
 b. The advantage that one country has over another when they possess a greater quantity of resources
 c. An advantage a country has when they are able to produce a product using fewer resources than another country
 d. An advantage obtained by a firm who has been given cash subsidies from the government

Option analysis:
- Option a: This describes a situation where one country has a lower opportunity cost in production, which is the concept of comparative advantage, not absolute advantage. Absolute advantage focuses on the quantity of resources used, not the trade-off between two goods. Therefore, this statement is incorrect as a definition of absolute advantage.
- Option b: This suggests that having more resources translates directly into absolute advantage. While resource endowments can influence production capacity, absolute advantage is specifically about producing a good with fewer resources (input) than another country, not merely having more resources overall. This makes the option inaccurate as the definition of absolute advantage.
- Option c: This statement says a country has an advantage when it can produce a product using fewer resources than another country. This aligns with the standard definition of absolute advantage: using fewer inputs (resources) to produce the same good compared to a competitor. This option accurately captures the concept.
- Option d: This describes an advantage arising from government subsidies to a firm, which relates to policy or subsidies rather than a country’s inherent production efficiency. It does not define absolute advantage and is thus incorrect in this context.

Summary of reasoning: The incorrect options (a, b, and d) either describe comparative advantage, misinterpret resource abundance, or refer to subsidies rather than production efficiency. The correct conceptual definition of absolute advantage is the ability to produce a good using fewer resources than another country, which is captured by the statement in option c.

What is absolute advantage?

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