Case Interview Prep

Answer: B - Absolute advantage means that an entity produces more of a product than its competitors.

Key Takeaway: An entity (firm or country) has absolute advantage if it produces more of a product than its competitors with the same resources. For example, if a Chinese chip manufacturing company produces 10 chips for every 2 employees per hour while an American company produces 7 chips for every 2 employees per hour, the Chinese company has absolute advantage. In this example, labor is the input unit but any other resource can also be used.