Question

	Time needed to produce 1 chair	Time needed to produce 1 frame
USA	60 mins	20 mins
China	80 mins	30 mins

Refer to table above as guide. Show the formulas used.

A.) Which country has absolute advantage in chairs

B.) Which country has absolute advantage in frames

C.) Which country has comparative advantage in chairs

D.) Which country has comparative advantage in frames

Answer 1

A country is said to have absolute advantage over other country if it produces more output as compare to other or take less time to produce

from the table it can be clearly seen that USA has absolute advantage in chair as well as frame Because it takes less time

answer A- US

answer B- US

C and D

a country is said to have competitive advantage over other country if it produces at lower opportunity cost opportunity cost is the ratio of what we give up to the what we gain

From the table it can be clearly seen that in chair China has competitive advantage and in frame US has a comparative advantage