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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 got a job in Washington, D.C. You move into an apartment with some acquaintances. All your roommates, however, are slackers and do not clean up after themselves. You, on the other hand, can clean faster than each of them. You determine that you are 70% faster at dishes and 10% faster with vacuuming. All of these tasks have to be done daily. Which jobs should you assign to your roommates to get the most free time overall? Assume you have the same number of hours to devote to cleaning. Now, since you are faster, you seem to get done quicker than your roommate. What sorts of problems may this create? Can you imagine a trade-related analogy to this problem?

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?

In Exercise 33.31, is there an “ask” where Venezuelans may say “no thank you” to trading with Canada?

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Is it possible to have a comparative advantage in the production of a good but not to have an absolute advantage? Explain
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