In a two-country, two-product world, the statement "Japan enjoys a comparative advantage over France in steel relative to bicycles" is equivalent to
A) France having a comparative advantage over Japan in bicycles relative to steel.
B) France having a comparative disadvantage against Japan in bicycles and steel.
C) Japan having a comparative advantage over France in steel and bicycles.
D) Japan having a comparative disadvantage against Japan in bicycles and steel.

Question

Quizplus · Accepted Answer

The statement implies that Japan is relatively better at producing steel compared to bicycles than France. Therefore, France must be relatively better at producing bicycles compared to steel than Japan. This is the definition of comparative advantage, where each country specializes in producing the good in which it has the lower opportunity cost. Therefore, A is the correct choice. B, C, and D do not accurately reflect the concept of comparative advantage as described in the question.

In a Two-Country, Two-Product World, the Statement "Japan Enjoys a Comparative