International Trade

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1. Define absolute advantage.
2. How can a country benefit from its absolute advantage?

1. A country has an absolute advantage in the production of a good if it can produce it using fewer resources than another country (more productively efficient).
2. When comparing two countries, each country should specialize in the production of the good in which they have an absolute advantage. By exporting this good to the other country and importing the other good, both countries will benefit from increased production and consumption of both goods, possibly leading to raised living standards.