Absolute advantage is determined by

Question

Quizplus · Accepted Answer

Absolute advantage refers to the ability of a country to produce a good using fewer resources (including labor) than another country. Thus, it is determined by actual differences in labor productivity between countries (such as differences in skills, technology, and capital investment), rather than relative differences based on exchange rates or other factors. Option B is incorrect because relative differences do not necessarily reflect actual differences in productivity. Option C incorrectly suggests that both factors are relevant, without acknowledging that actual differences are the primary determinant. Option D is incorrect because one of the factors (actual differences in labor productivity) is important in determining absolute advantage.

Absolute Advantage Is Determined by