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Chapter 20: Q. 17 (page 494)

Are differences in geography behind the

differences in absolute advantages?

Short Answer

Expert verified

Yes, the differences in geography are behind the differences in absolute advantages.

Step by step solution

01

Step 1. Meaning of Absolute Advantage.

A country has an absolute advantage when it can produce the same quantity of output at a lower cost or more quantity of output at the same cost.

02

Step 2. Differences in geography.

Yes, the differences in geography are behind the differences in absolute advantages. For example, Saudi Arabia has an absolute advantage in the production of crude oil due to its geographical location. Guatemala has a more suitable climate to grow coffee. Thus, it is true that natural endowment and geographical location influences absolute advantage.

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Most popular questions from this chapter

Are the gains from international trade more likely to be relatively more important to large or small countries?

Brazil can produce 100pounds of beef or 10autos. In contrast, the United States can produce 40pounds of beef or 30autos. Which country has the absolute advantage in beef? Which country has the absolute advantage in producing autos? What is the opportunity cost of producing one pound of beef in Brazil? What is the opportunity cost of producing one pound of beef in the United States?

Look at Table 20.9. Is there a range of trades for

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