Absolute advantage is a trading principle that states that:
A) differences in resource endowments determine comparative advantage.
B) differences in incomes determine comparative advantage.
C) absolute cost differences determine the basis for trade.
D) relative cost differences determine the basis for trade.
E) differences in exchange rates cause trade.

Question

Quizplus · Accepted Answer

Absolute advantage refers to the ability of a country to produce a good more efficiently (i.e., at a lower absolute cost) than another country, which determines the basis for trade according to this principle.

Absolute Advantage Is a Trading Principle That States That