Asked by Brianna Weidaman on Apr 25, 2024
Verified
Assume that by devoting all its resources to the production of X, nation Alpha can produce 20 units of X. By devoting all its resources to Y, Alpha can produce 30Y. Comparable figures for nation Beta are 60X and 40Y. There is no basis for trade between Alpha and Beta, because Beta has an absolute advantage in the production of both goods.
Absolute Advantage
The ability of an individual, company, or country to produce a good or service at a lower cost than competitors.
- Master the idea of comparative advantage and its effects on international business.
- Understand the applications and limitations of the concept of absolute advantage in trade.
Verified Answer
FB
Fernanda Bezerra8 days ago
Final Answer :
False
Explanation :
Even though Beta has an absolute advantage in both goods, trade can still be beneficial due to comparative advantage, which allows for more efficient allocation of resources and increases total output.
Learning Objectives
- Master the idea of comparative advantage and its effects on international business.
- Understand the applications and limitations of the concept of absolute advantage in trade.
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