Case Study: Starting a Business — Quiz

Question 15 • CMS 2026-2027 Economics and Personal Finance INITIAL CREDIT

What is the difference between absolute advantage and comparative advantage?

Answer

Absolute advantage is the ability to produce a good or a service at a lower opportunity cost than competitors. Comparative advantage is the ability to produce a good or service at a lower production cost than competitors.

Absolute advantage is the ability to sell a good or a service at a higher price than competitors. Comparative advantage is the ability to sell a good or service at a lower price than competitors.

Absolute advantage is the ability to sell a good or a service at a lower price than competitors. Comparative advantage is the ability to sell a good or service at a higher price than competitors.

Absolute advantage is the ability to produce a good or a service at a lower production cost than competitors. Comparative advantage is the ability to produce a good or service at a lower opportunity cost than competitors.

Explanation

Absolute advantage means producing a good or service using fewer resources or at a lower production cost than another producer. Comparative advantage means producing it at a lower opportunity cost—the producer gives up less of other goods to make it. Choice A correctly distinguishes production cost from opportunity cost.

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