When a producer has the ability to produce a good or service at a lower opportunity cost than others, economists say the producer:
A) has an absolute advantage at producing that good.
B) has a comparative advantage at producing that good.
C) has no reason to trade with others.
D) is efficient in production.

Question

Quizplus · Accepted Answer

When a producer has a lower opportunity cost of producing a good or service, this means they have a comparative advantage. This means that even if they can produce all goods at a lower cost than others (absolute advantage), they should still specialize in producing the good they have the lowest opportunity cost for and trade with others in order to maximize overall output and efficiency. Therefore, choice B is the correct answer. Choices A, C, and D are incorrect because they do not fully explain the concept of comparative advantage.

When a Producer Has the Ability to Produce a Good