Which of the following statements is FALSE?
A)Comparative advantage is the principle upon which trade patterns are based.
B)Opportunity cost measures the real cost to a country of producing a certain product.
C)The gains from trade are the result of differences in opportunity cost and comparative advantage.
D)A country that possesses an absolute advantage will always have a comparative advantage.

Question

Quizplus · Accepted Answer

A country that has an absolute advantage in producing a good can produce that good using fewer resources than another country. However, comparative advantage is based on opportunity cost, which is the cost of producing a good in terms of the foregone production of another good. Therefore, a country may not have an absolute advantage in producing any goods, but may still have a comparative advantage in producing certain goods due to lower opportunity costs.

Which of the Following Statements Is FALSE