The Gains from Free Trade Comparative advantage-Situation in which country 1 has an advantage over country 2 in producing a good because the cost of producing the good in 1,relative to the cost of producing other goods in 1,is lower than the cost of producing the good in 2, relative to the cost of producing other goods in 2. Absolute advantage-Situation in which country 1 has an advantage over country 2 in producing a good because the cost of producing the good in 1 is lower than the cost of producing it in 2.The Gains from Free Trade  Comparative advantage - Situation in which country 1 has an advantage over country 2 in producing a good because the cost of producing the good in 1, relative to the cost of producing other goods in 1, is lower than the cost of producing the good in 2, relative to the cost of producing other goods in 2.  Absolute advantage - Situation in which country 1 has an advantage over country 2 in producing a good because the cost of producing the good in 1 is lower than the cost of producing it in 2