What is one benefit of having Absolute Advantage compared to Mercantilism?

What is one benefit of having Absolute Advantage compared to Mercantilism?

• A. It facilitates trade among all nations equally.
• B. It promotes a more efficient allocation of resources.
• C. It provides clear guidance for inferior nations.
• D. It encourages competition among all industries.

Answer: (B)

Having an Absolute Advantage, where a country can produce a good more efficiently than others, promotes a more efficient allocation of resources. This is because countries will specialize in producing goods for which they have an absolute advantage, allowing them to produce at lower costs and higher levels of efficiency. This specialization leads to increased overall production, benefiting not only the country with the absolute advantage but also its trading partners. As nations focus on their strengths, resources are utilized in a manner that maximizes output and minimizes waste, enhancing global efficiency in production. In contrast, Mercantilism focuses on accumulating wealth primarily through the accumulation of gold and trade surpluses, often leading to policies that can restrict trade and limit specialization. This can result in inefficient resource allocation as nations may produce goods they are not best suited to create just to maintain a favorable trade balance. Thus, the benefit of Absolute Advantage lies in its ability to encourage efficiency and mutual gains from trade, distinguishing it clearly from the principles of Mercantilism.

Having an Absolute Advantage, where a country can produce a good more efficiently than others, promotes a more efficient allocation of resources. This is because countries will specialize in producing goods for which they have an absolute advantage, allowing them to produce at lower costs and higher levels of efficiency. This specialization leads to increased overall production, benefiting not only the country with the absolute advantage but also its trading partners. As nations focus on their strengths, resources are utilized in a manner that maximizes output and minimizes waste, enhancing global efficiency in production.

In contrast, Mercantilism focuses on accumulating wealth primarily through the accumulation of gold and trade surpluses, often leading to policies that can restrict trade and limit specialization. This can result in inefficient resource allocation as nations may produce goods they are not best suited to create just to maintain a favorable trade balance. Thus, the benefit of Absolute Advantage lies in its ability to encourage efficiency and mutual gains from trade, distinguishing it clearly from the principles of Mercantilism.