Why should countries trade?
If a country can produce a good for less than another
country can, then the
opportunity for advantageous trade exists and both
countries could benefit.
Explain absolute advantage.
An absolute advantage occurs when one producer uses a
smaller amount of inputs to produce a given amount of
outputs than another producer.
Explain comparative advantage.
A comparative advantage occurs when a producer has a
lower opportunity cost of production than other
Who should produce goods when using trade advantages as
The producer with the absolute advantage or the
producer with the comparative advantage should always
What is an opportunity cost?
An opportunity cost is a way of describing what is
given up when one choice is taken over another.