Assume the United States has an absolute advantage in the production of everything compared to the African nation of Berundi. Can you think of any reason why both nations would still find it to their mutual advantage to trade with each other?

Question

Quizplus · Accepted Answer

The Answer is Comparative advantage is the driving force behind why nations trade, not absolute advantage. What that means is that even though one nation has an absolute advantage in everything compared to another it can't possibly have a comparative advantage in everything. Likewise, even though in this case Berundi has an absolute disadvantage in the production of everything it will have a comparative advantage in at least one thing.

Assume the United States Has an Absolute Advantage in the Production