Why is comparative advantage rather than absolute advantage the basis for trade?

The concept of comparative advantage emphasizes the efficiency of production, measured by the opportunity cost of expanded production of some good. If a country has a comparative advantage in something, it is able to increase production of it at lower opportunity cost, and will therefore give up less of other things as it expands output. As such, it is the least inefficient in production.

If every nation specializes where each has a comparative advantage, then each gives up the least as it expands output of a product. This is the lowest (opportunity) cost method of increasing output. If every other nation imports from nations that have a comparative advantage in production, that is a lower (opportunity) cost way to obtain the goods than trying to produce the goods domestically.

The emphasis in the analysis is on opportunity cost, and on increasing production (for consumption) as efficiently as possible.

Economics

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