Assume that because of soil and climatic conditions Brazil i

Assume that because of soil and climatic conditions, Brazil is more efficient in the production of coffee than the United States. At the same time, the United States is more efficient in the production of apples than Brazil. Each of these countries can be said to have a(n) _____.

absolute advantage

factor endowment destruction in land

bartering disadvantage

mercantile disadvantage

comparative advantage

Solution

Answer is A - Absolute advantage

A country will have absolute advantage if it can produce the goods at lower cost per unit than the other country. This is because that country has proper skills, demographics etc to produce the good at lower cost.