Paper Example: Trade and Absolute. Comparative Advantages

The scenario depicted in the data indicates that China will have an absolute advantage in the production of all of the two products because of the reduced quantity inputs the country has in the production of a unit of the products in comparison to France.

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A country is said to have an absolute advantage over other competing countries if it can produce goods and services at a cheaper price than its competing countries. This also means that a country will obtain an absolute advantage if it produces products and services more efficiently than the other competing nations. It is differentiated from the comparative advantage in that the absolute advantage looks at the scale of the productivity of the country against that of the competing nations. In contrast, the relative advantage looks at the capacity of the government to produce goods and services at advantageous diminished costs over its competing nations. Therefore, with the absolute advantage, the quantity inputs are determined to be fewer in quantity and thus being cheaper. In contrast, the comparative advantage the country has to have specialization in the production of the goods and services that it has the least opportunity costs so that it can improve its productivity in the area of production of the products and services.

For the outlined case, it is stated that whereas France requires 110 workers for the production of a unit of wine, China will request only 90 workers for the creation of the same amount of wine. It is, therefore, apparent that China has fewer quantity inputs for the production of wine, thus making the production of wine cheaper. On the other hand, France has a higher quantity of inputs of laborers in the production of wine. France requires an additional ten workers to the quantity input of China (90) to produce a unit of wine. The fewer quantity inputs make China's cost of production of wine less, thus allowing the country to obtain an absolute advantage over France in the production of wine.

Similarly, China has an absolute advantage over France in the production of machinery. This is because China requires lesser quantity inputs to produce a unit of the machinery. Whereas France will require 90 workers to provide a group of machinery, China only requires 70 workers for the production of the same unit of machinery. Therefore, China requires 20 less workers to produce the same unit of machinery. This indicates that the cost of production of machinery in China is lower than that of the production of the same machinery in France, thus giving China an absolute advantage over France.

From the data, it is obvious that China has an absolute advantage over China because it has a lower quantity input for both of the production units. Therefore, China can produce the units of the said products at a lower cost than can France. This is because labor consumes a significant portion of the production cost of products. Hiring a few laborers gives the country an added advantage since it results in reduced costs. For this reason, China can produce both wine and machinery at a reduced price than can France. This indicates that China has an absolute advantage over France in the production of both motor and wine.

These two countries have no interest in working together as they compete in the production of these goods and services. Besides, China would not like to trade with France because it has an absolute advantage over France. There is virtually nothing that the country stands to benefit from trading with the French. It would, therefore, seek to exploit its absolute advantage over France rather than work with France and risk minimizing its absolute advantage over the country.

However, economists argue that the absolute advantage does not necessarily mean that the company enjoys a comparative advantage over its competitors because there are many prevailing conditions in the production of goods and services. For example, the production costs of wine and machinery in China may require few labor quantity inputs in comparison to France. Still, the labor costs may be higher, thus considerably influencing the production costs. Besides, a country may also enjoy a competitive advantage in the production of a specific product but still favor the participation of another. For this reason, we conclude that the interest of the involvement between the two countries will solely rely on the comparative advantage in the production of the products.

There is no doubt that the absolute advantage in the production of wine and machinery is in favor of China in comparison to France. Therefore, other things being constant, China would not have an interest in working together with France because doing so would dilute its absolute advantage over France. However, several factors may be considered in the market for this decision to be made. It is for this reason that the paper concludes that other things being constant, the Chinese would not have an interest of working together with France because they have an absolute advantage over France. This is because China has an absolute advantage in the production of the two products. However, there would be an interesting situation if China would get interested in working with France in which China focuses on the production of wine. In contrast, France focusses on the creation of machinery. This would enhance each countries productivity, and they would all benefit because of the specialization.