CFA Practice Question

There are 341 practice questions for this study session.

CFA Practice Question

Units of output per work day:

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?
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