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6 Nov 2021

Introduction

When a country can create a product with fewer factors of production than another, it has an absolute advantage. Comparative advantage, on the other hand, suggests that a country should focus on the commodities and services it can create at the lowest opportunity cost and then trade with another country. Trade is all about exchanging goods and services that benefit both parties. Even if a country's absolute advantage is modest or non-existent, it can still gain from trade by focusing on its comparative advantage.

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