- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 6. International Trade
- Subject 1. International Trade
CFA Practice Question
Units of output per work day:
B. The United States has an absolute advantage in clothing and Japan has an absolute advantage in food.
C. The United States has an absolute advantage in food and clothing.
Which of the following statements is correct?
A. The United States has an absolute advantage in food and Japan has an absolute advantage in clothing.
B. The United States has an absolute advantage in clothing and Japan has an absolute advantage in food.
C. The United States has an absolute advantage in food and clothing.
Correct Answer: C
Absolute advantage is the ability of a nation to produce more of a good (with the same quantity of resources) than another nation. In this example, the U.S. has an absolute advantage in both goods.
User Contributed Comments 6
| User | Comment |
|---|---|
| i020757 | is the situation in which a nation, as the result of its previous experience and/or natual endowments, can produce... |
| hmvc | absolute advantage means 'most produces' |
| ilzina | is it because US can produce more of both types than Japan? |
| ljamieson | Yes. Suppose there is only one worker in each country. The US worker produces more of both. |
| davcer | comparative advantage, compare ratios absolute advantage, compare quantity |
| namuhama | how can assume if the two countries had used and had access to the same amount of resources? |