absolute advantage



In the theory of international trade, a country or firm has an absolute advantage if it can produce a product (good or service) more 'efficiently' (cheaply) than others. First suggested by the UK economist Adam Smith (1723-90) as an extension of his division of labor doctrine. See also absolute cost advantage and competitive advantage.

Use absolute advantage in a sentence

  • The small country was proud to have found a way to produce cotton more efficiently and cheaply than its neighbors, as it then had an absolute advantage in the region's textile business.

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  • Fortunately there was little competition at the time due to our processes that were unmatched by our rivals so we enjoyed an absolute advantage.

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  • When it came to outsourcing tech support to overseas call centers, it appeared initially that India had the absolute advantage -- until customer backlash became impossible for American companies to ignore.

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