Note that an absolute advantage depends on the physical quantities of the inputs used and is not based on the cost of those inputs. It might be that fewer inputs are used, but that those inputs have a greater opportunity cost. A consideration of the opportunity cost of the inputs used gives rise to a related, and more important concept, comparative advantage.

While a person, country, business, government, or other producing entity may or may not have an absolute advantage in production, every producer has a comparative advantage in the production of something.

Head of the Class

• He was the president of the senior class, all-star quarterback of the football team, and state-wide chess champion.


• He was an accomplished artist and writer, the lead in all of the school plays, editor of the school newspaper, and captain of the basketball team.


• He maintained a 4.0 grade average, volunteered at the homeless shelter, played drums and guitar in a rock band, and crafted fine furniture in his spare time.

Lawrence had an absolute advantage in high school (especially compared to classmates), because he could accomplish more, perform better, achieve higher standards, and produce more with less effort. He could whip out a 10-page term paper in an hour, build an elaborate bookcase in a day, or throw several touchdown passes during a football game.

Other humans would spend more time and generate less output.

However, even though Lawrence was and still is better at everything that anyone else, he does not do everything. After high school he obtained a medical degree and now devotes his productive efforts only to performing surgery. Rather than producing everything himself, he purchases the productive efforts from others using the income generated from his surgical activities.

In a like manner, nations can also have an absolute advantage in the production of goods. These nations are so "skilled" and "talented" that they can produce more output with fewer inputs. For a nation, this absolute production advantage typically arises due to technological superiority.

Head of the World

An Absolute Advantage

To illustrate absolute advantage, take a look at the exhibit to the right. This chart presents the options facing the two hypothetical nations -- Csonda and Northwest Queoldiola -- for the production of two goods -- turnips and sundials. Each nation can produce either good. However, due to differences in technology, human capital, and available resources, each nation achieves a different technical efficiency for production.

Csonda is able to produce 60 pounds of turnips or 20 sundials for a given unit of labor effort -- a month of work. In contrast, Northwest Queoldiola is able to produce only 20 pounds of turnips or 10 sundials with one month of labor.

These numbers indicated that Csonda has an absolute advantage over the Northwest Queoldiola in the production of both goods. Due to production superiority, Csonda can produce more of either good using the same amount of labor. Or, to emphasize technical efficiency, Csonda could can produce the same amount of each good as Northwest Queoldiola using less labor.

So Why Trade? A Comparative Alternative

The answer would seem to be nothing!

However, international trade between Csonda and Northwest Queoldiola is, in fact, a distinct possibility. Moreover, such trade can be beneficial to both nations. The key to trade rests not with the absolute abilities of Csonda production, but with the relative abilities of the two nations, what is term comparative advantage.

A country is said to have a comparative advantage if it can produce one good at a relatively lower opportunity cost than other goods, compared to the production in another country. Even though Csonda is absolutely better at producing both goods using than Northwest Queoldiola, Northwest Queoldiola actually incurs a relatively lower opportunity to produce one good (sundials).