Explain the concepts of absolute advantage and comparative advantage. Is it possible for a firm to have an absolute advantage in producing something without having a comparative advantage? Why or why not?
What will be an ideal response?
Absolute advantage refers to the ability to produce a good using fewer resources than someone else. Comparative advantage refers to the ability to produce a good at a lower opportunity cost than another producer. Yes, a firm can have an absolute advantage without having a comparative advantage. A firm may be able to produce more of a good or service than its competitors, but that does not necessarily mean it can produce the good or service at a lower opportunity cost than its competitors.
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Indicate whether the statement is true or false
With ATMs, it is possible to retrieve cash from the bank at any time. One hundred years ago, one could only get cash from the bank during business hours, say, 9 am to 3 pm. The present availability of 24-hour service has arisen because:
A. the cost of providing 24-hour service is much lower today. B. government forced banks to become more convenient. C. flexibility was not valued 100 years ago. D. it was impossible to provide 24-hour service 100 years ago.