In economics a party has an "absolute advantage" over another party in producing a certain good if the material cost of producing that good is less than it would cost the other party to produce. For example, if it costs the US $10 to make a gun, and it costs New Zealand $15, than the US would have an absolute advantage over New Zealand in the production of guns.

In the Theory of Comparative Advantage, first formulated by David Ricardo, absolute advantage should not guide a nation's decisions about what goods to produce and what goods to trade, because absolute advantage does not account for the opportunity costs of producing a given good. Instead nations should base their decisons on which goods they have a "comparative advantage" in producing, because comparative advantage accounts for the opportunity cost of the good.

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