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Author Question: Compare and contrast absolute advantage and comparative advantage. What will be an ideal ... (Read 191 times)

storky111

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on: Jun 29, 2018
Compare and contrast absolute advantage and comparative advantage.
 
  What will be an ideal response?

Question 2

How do firms make investment decisions?
 
  What will be an ideal response?


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memslove

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Reply #1 on: Jun 29, 2018
Answer to Question 1

Absolute advantage refers to the ability of a person or nation to produce a good or service using fewer inputs than another person or nation. In contrast comparative advantage is when a good or service can be produced at a lower opportunity cost than another person or nation.

Answer to Question 2

To determine the quantity of investment, firms compare the expected profit rate from an investment to the real interest rate. The expected profit from an investment is the benefit from the investment. The real interest rate is the opportunity cost of investment. If the expected profit from an investment exceeds the cost of the real interest rate, then firms make the investment. If the expected profit from an investment is less than the cost of the real interest rate, then firms do not make the investment.


storky111

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Reply #2 on: Jun 29, 2018
Thank you


memslove

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Reply #3 on: Jun 29, 2018
No problemo


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