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Comparative advantage refers to the ability of a person, firm, or region to produce a product at a relatively lower opportunity cost. Absolute advantage refers to the ability of a person, firm, or region to produce a product at a lower cost.

An absolute advantage exists when production can take place at a relatively lower cost or more output can be produced at a lower cost. A person may not have an absolute advantage in production but they may possess a comparative advantage.

For instance, a lawyer can type at a speed of 80 wpm. They can also represent clients at a rate of $100 per hour. A receptionist can type at a speed of 60 wpm. They have a job paying $20 per hour. Here, the receptionist does not have an absolute advantage in typing as it would take them more time to type the same amount of words. However, they enjoy a comparative advantage as they have to sacrifice $20 if they want to type for an hour., whereas the lawyer has to sacrifice $100 to type for an hour.