Absolute Advantage
Individual: exists when the person can produce more of a certain good/service than someone else in the same amount of time (or produce the good using the least amount of resources)
National: exists when the country can produce more good/service than another country can in that same time period.
Comparative Advantage
-- a person or a nation that has comparative advantage when it can produce the product at a lower domestic opportunity cost than a trading partner.
Examples of output problems
1. Words per minute
2. Miles per gallons
3. Tons per acre
4. Apples per tree
5. Televisions produced per hour
Examples of input problems
1. Number of hours to do the job
2. Number of acres to feed a horse
3. Number of gallons of paint to paint a house
Specialization and trade
•• Gains from trade are based on comparative advantage, not the absolute advantage.
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