Question

In Country \(\mathrm{A},\) a worker can make 5 bicycles per hour. In Country \(B\), a worker can make 7 bicycles per hour. Which country has an absolute advantage in making bicycles? \(L O 38.2.\) a. Country A. b. Country B.

Short answer

Country B has an absolute advantage.

Step-by-step solution

Define Absolute Advantage

Absolute advantage refers to the ability of an entity (like a country) to produce more of a good using the same amount of resources compared to another. Hence, we will determine which country can produce more bicycles per hour with one worker to find the country with absolute advantage.

Calculate Production per Hour

For Country A, the production rate is 5 bicycles per hour. For Country B, the production rate is 7 bicycles per hour. So, based on production rates, we compare which country has a higher output of bicycles per hour with the same labor (one worker-hour).

Compare Production Rates

Look at the production figures: - Country A: 5 bicycles per hour - Country B: 7 bicycles per hour Since Country B can produce more bicycles per hour than Country A, Country B has the absolute advantage in bicycle production.

Key concepts

International Trade

International trade is a key concept that helps countries leverage their unique abilities to enhance economic growth and efficiency. Each country has different resources and skills, leading to a diversity in production efficiencies. When countries engage in trade, they can exchange goods and services that they produce efficiently for those that another country can produce more efficiently.
By doing so, countries can specialize in the production of goods where they have an absolute advantage, producing more efficiently and potentially at a lower cost. This international exchange of goods can lead to a more efficient allocation of resources globally, allowing countries to enjoy a greater variety of goods and services than if they produced them domestically with less efficiency.

• Increases efficiency by focusing on areas of strength.
• Enhances economic growth through access to a broader market.
• Provides consumers with a wider range of products.

Production Rates

Production rates measure how much output is produced per unit of input within a set time frame. In the context of our exercise, this is explored through the lens of how many bicycles can be produced by a worker in one hour in countries A and B.
The production rate is crucial for determining economic efficiency and competitiveness in the global market. For example, higher production rates can mean more goods available for export, giving a country a better standing in international trade.
In Country A, the production rate is 5 bicycles per hour, while in Country B, it is 7 bicycles per hour. This indicates that Country B is more efficient in bicycle production, which implies a direct benefit in trade terms. Therefore, understanding production rates can help countries optimize resources and improve their international economic status.

Labor Productivity

Labor productivity is a measure of how efficiently labor is used to produce goods. It assesses the output per worker or per hour worked. In our example, labor productivity is assessed by comparing the number of bicycles produced by a single worker in an hour in two different countries.
When discussing absolute advantage, labor productivity is a core factor. Here, Country B, with a production ability of 7 bicycles per hour, demonstrates greater labor productivity than Country A, which produces 5 bicycles in the same period.

• Higher labor productivity implies a more efficient workforce.
• It can lead to lower production costs and increased competitiveness.
• Fostering higher productivity often involves investments in technology, training, and innovation.

Recognizing and enhancing labor productivity allows countries to improve their competitive edge and can lead to better wages and improved living standards.