If nation A has an absolute advantage over nation B in the production of a product, this implies that
A) it requires fewer resources in A to produce the good than in B.
B) the cost of producing the good in terms of some other good's production that must be sacrificed is lower in A than in B.
C) nation B could not benefit by engaging in trade with A.
D) nation A should acquire this product by trading with B.
E) nation A could not benefit by engaging in trade with B.

Question

Quizplus · Accepted Answer

Absolute advantage means that nation A can produce the good using fewer resources than nation B. This implies that nation A has lower production costs and can produce more efficiently. However, this does not necessarily mean that nation B cannot benefit from trade with nation A, as comparative advantage takes into account the opportunity cost and relative efficiency of producing different goods.  Therefore, choice B, C, D, and E are incorrect.

If Nation a Has an Absolute Advantage Over Nation B