Look at the examples, and then determine which type of advantage each one describes.

A producer can provide cable service more cheaply than another producer.

A producer can produce salads while giving up fewer opportunities to make sandwiches than another producer.

A producer can create more car parts than another producer, while using the same number of resources.

Question

Business

Yoselin

4 March, 18:26

Look at the examples, and then determine which type of advantage each one describes.

A producer can provide cable service more cheaply than another producer.

A producer can produce salads while giving up fewer opportunities to make sandwiches than another producer.

A producer can create more car parts than another producer, while using the same number of resources.

+5

Answers (2)

Know the Answer?

Fawn · Answer 1

1) If a producer can provide cable service more cheaply than another producer, it is an absolute advantage.

2) If a producer can produce salads while giving up fewer opportunities to make sandwiches than another producer, it is a comparative advantage.

3) If a producer can create more car parts than another producer does, using the same number of resources, the price per unit is cheaper and it is an absolute advantage.

Absolute advantage is the ability of a person, a country, company or region to produce a good or service at a cheaper price per unit than another entity producing the same good or service.

Comparative advantage is the ability of a person, a country, company or region to produce a specific good or service more efficiently (lower opportunity cost) than another entity to produce the same good or service.

Oprah · Answer 2

Answer

A producer can provide cable service more cheaply than another producer (Absolute Advantage)

A producer can produce salads while giving up fewer opportunities to make sandwiches than another producer (Comparative advantage)

A producer can create more car parts than another producer, while using the same number of resources (Absolute Advantage)

Explanation

Absolute advantage is the ability of a producer to utilize the same amount of resources in the production of goods and services than the competitors. Here the producer gives a lower cost per unit than the other parties producing a similar good. For example in case 1 and 3.

A comparative advantage occurs when a producer is able to utilize fewer resources, at a lower opportunity cost to produce goods. When there is an increased production of one good, less of another product is produced. A comparative advantage will allow a company to sell products and services at a lower price that others and reach stronger sales margins. For example in case 2.