Specialisation and Trade

Question 1

Absolute advantage

Answer 1

When a country supply a product using fewer resources than another nation

Question 2

Comparative advantage

Answer 2

• The relative opportunity cost of production for a good or service is lower in one nation
• If a country is more productively efficient

Question 3

Assumption

Answer 3

• constant returns to scale
• factor mobility
• no trade barriers
• low transportation costs
• no significant externalities