Question

When one nation can produce a product at lower cost relative to another nation, it is said to have a(n) __________________ in producing that product. *

A. relative advantage
B. absolute advantage
C. economy of scale
D. production efficiency

Answer 1

The correct answer is:

B. absolute advantage

Answer 2

A nation that can produce a product at a lower cost than another nation has an absolute advantage. Absolute advantage enables a country to be more productive using fewer resources, different from comparative advantage, which is about lower opportunity costs. The correct multiple-choice option is (b).

Step-by-step explanation:

When one nation can produce a product at lower cost relative to another nation, it is said to have an absolute advantage in producing that product. A nation with an absolute advantage can produce more of a good per unit of labor than another country, using fewer resources. This concept differs from comparative advantage, where a nation can produce a good at a lower opportunity cost than others. Specialization based on comparative advantage allows countries to gain from trade, leading to higher consumption and production globally. The correct multiple-choice option is (b).