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Chapter 33: Q.17 (page 804)

Are differences in geography behind the differences in absolute advantages?

Short Answer

Expert verified

yes

Step by step solution

01

Step 1. Definition

Absolute advantage refers to the ability of a person, firm, or region to produce a product at a comparatively lower cost or to produce more output at the same cost.

02

Step 2. Explanation 

Differences in geography can be one of the sources of absolute advantage. Because of different geographical features such as climate, and resources availability. etc. it can be possible for a country to produce a good at a lower cost. For instance, the abundance of oil reserves in Saudi Arabia contributes to its absolute advantage in oil production. Similarly, Guatemala has an appropriate climate for coffee production, thus it enjoys an absolute advantage.

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Most popular questions from this chapter

You just overheard your friend say the following: 鈥淧oor countries like Malawi have no absolute advantages. They have poor soil, low investments in formal education and hence low-skill workers, no capital, and no natural resources to speak of. Because they have no advantage, they cannot benefit from trade.鈥� How would you respond?

How can there be any economic gains for a country from both importing and exporting the same good, like cars?

True or False: The source of comparative advantage must be natural elements like climate and mineral deposits. Explain

Brazil can produce 100 pounds of beef or 10 autos. In contrast the United States can produce 40 pounds of beef or 30 autos. Which country has the absolute advantage in beef? Which country has the absolute advantage in producing autos? What is the opportunity cost of producing one pound of beef in Brazil? What is the opportunity cost of producing one pound of beef in the United States?

If the removal of trade barriers is so beneficial to international economic growth, why would a nation continue to restrict trade on some imported or exported products?
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