| Chapter 15 Outline |
| II. COMPARATIVE ADVANTAGE AND INTERNATIONAL TRADE |
| A. Comparative and Absolute Advantage |
| 1. A country has a comparative advantage in a good or service if it can produce
the good or service at a lower opportunity cost than its trading partner. |
| 2. A country has an absolute advantage if it can produce a good or service with fewer resources than its trading partner. |
| 3. Countries gain by producing goods and services for which they have a comparative advantage and exchanging them for goods and services for which they have a comparative disadvantage. |