A country possesses a comparative advantage in the production of a product if
A)the opportunity cost, in terms of the amount of other products that it gives up to produce this product, is lower than it is for its trading partners.
B)it possesses an absolute advantage in the production of this good compared to its trading partners.
C)it is able to produce less of this good per worker than its trading partners.
D)it can produce more of this good per hour than its trading partners.

Question

Quizplus · Accepted Answer

A country has a comparative advantage in the production of a product if its opportunity cost, in terms of the amount of other products that it gives up to produce this product, is lower than it is for its trading partners. This means that the country can produce the specific good at a lower cost than other countries, giving it an advantage in trade. Absolute advantage (option B) refers to a country's ability to produce a specific product using fewer resources than another country, which is not always the case in comparative advantage. Option C is incorrect since producing less does not necessarily mean having a comparative advantage, and Option D is incorrect because the focus is on cost, not time.

A Country Possesses a Comparative Advantage in the Production of a Product