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Absolute Advantage & Comparative Advantage
Theory of absolute advantage
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The ability of one country to produce a good using fewer resources than another country
From this diagram, we can find out that:
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Coffenia has an absolute advantage in producing coffee
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Robotia has an absolute advantage in producing robot
Theory of comparative advantage
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The situation where one country has a lower opportunity cost (relative cost) in the production of a good than another country
From this diagram, we can find out that:
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Cottonia has a comparative advantage on cotton
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Microchippia has a comparative advantage on microchips
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