Which of the following is NOT true concerning comparative advantage?
A)The comparative advantage is determined by which person can produce a good using fewer inputs.
B)The principle of comparative advantage applies to countries as well as people.
C)Economists use the principle of comparative advantage to advocate free trade.
D)Gains from trade are based on the principle of comparative advantage.

Question

Quizplus · Accepted Answer

Comparative advantage is determined by which person or country can produce a good at a lower opportunity cost, not by using fewer inputs. The concept of opportunity cost involves considering the foregone alternative of producing a good instead of another, and it accounts for the fact that resources are scarce and have alternative uses. Thus, even if person A can produce a good with fewer inputs than person B, it may still be optimal for person A to specialize in producing the good for which they have a lower opportunity cost, as this would allow for more efficient resource allocation and gains from trade with person B.

Which of the Following Is NOT True Concerning Comparative Advantage