Absolute Advantage vs. Comparative Advantage

1. Absolute Advantage vs. Comparative Advantage • A country has absolute advantage if they can produce a good more efficiently. • A country has comparative advantage if they can produce a good with a lower opportunity cost.

2. Absolute Advantage • Who has absolute advantage in wheat production? ___________ • Cloth? __________ Portugal Portugal

3. Comparative Advantage • Who has comparative advantage (lower opportunity cost) in wheat? _______________ • Cloth? _______________ England Portugal

4. Input or Output? • The previous question was an input question. These usually indicate how much time it takes to make 1 unit of a good. • Output questions will display the output (number of products) on the chart that you can produce in a given time. Output=Over Input=Under

5. Output Practice: Items produced in one day Who has absolute advantage in boats? ___________ Umbrellas? __________ La Porte Deer Park

6. Output Practice : Items produced in one day Who has comparative advantage (lower opportunity cost) in boats? _______________ Umbrellas? _______________ La Porte Deer Park