Trading: Absolute, Comparative or National

There are three advantages today that companies may utilize to help differentiate themselves from other regions or countries. Some companies possess the ability to manufacture product at a cheaper rate while other companies may possess more of the product that needs to be manufactured. The three advantages I would like to discuss today include absolute advantage, competitive advantage, and national competitive advantage.

Let's begin with the first advantage known as absolute advantage. According to Dictionary.com (2007), absolute advantage is "a business situation in which a provider of goods or services is more profitable or efficient than all of its competitors, by having a smaller total input per unit of output". One of the three given scenarios will fall under this form of advantage. The second scenario states that a country mines a high-demand precious gym that is only found in their country. Once found, they distribute these gems all over the world to jewelry dealers. (CTU online, 2006). It is clear that the other countries wouldn't have a product if the mining company didn't distribute the gems.

The second advantage is known as comparative advantage. According to Dictionary.com (2007), comparative advantage is "the ability of an individual or group to carry out an economic activity, such as production, at a lower cost and more efficiently than another entity". One of the remaining two scenarios falls under this form of advantage. The first scenario that discusses the stereo equipment would fall under this form of advantage. Even though this company can produce stereo equipment at a lower price and labor cost, they don't necessarily have to produce them at the same quality as other countries to have a comparative advantage. Since this country can produce the stereo equipment with lower labor costs than the rest of world, it has a comparative advantage.