Can someone please explain the concept of absolute advantage with an example? I know it has to do with the fact that a nation should produce a commodity that is cheap relative to other commodities but I don't really understand the concept.
Say two countries have the same amount of resources. A has an absolute advantage relative to B if A has technology such that A produces a larger quantity of output using that given level of resources relative to B. So, lets say potatoes are inputs and mashed potatoes are outputs. A has an absolute advantage in mashed potato production if it can produce more pounds of mashed potatoes than B. Comparative advantage, on the other hand, deals with the opportunity cost. For example, the french fries foregone by each country when they decide to produce mashed potatoes.
It is worth noting that comparative advantage is the basis of trade. Not absolute advantage.