Absolute Advantage in International Trade

Steps:

• Recall that absolute advantage occurs when a country produces more of a good using the same resources compared to another country.
• Examine each option against this definition of efficiency in production per unit input.
• Eliminate options describing opportunity costs, wages, or trade prices, which relate to comparative advantage or terms of trade.
• Confirm the matching option focuses on output per resource.

Why D is correct:

• Absolute advantage is defined by Adam Smith as a country producing a greater quantity of a good per unit of input (like labor or resources) than another, enabling efficient specialization.

Why the others are wrong:

• A describes comparative advantage, based on lower opportunity costs.
• B confuses absolute advantage with labor cost differences, not overall productivity.
• C refers to terms of trade, comparing export and import prices.

Final answer: D