Comparative advantage, not absolute advantage, determines the decision to specialize in production.

Question

Quizplus · Accepted Answer

Comparative advantage is the ability to produce a good or service at a lower opportunity cost than another producer. It is not determined by absolute advantage, which is the ability to produce more of a good or service using the same amount of resources as another producer. Therefore, the decision to specialize in production is based on comparative advantage, not absolute advantage.

Comparative Advantage, Not Absolute Advantage, Determines the Decision to Specialize