A country has a comparative advantage in a good if
A)It can produce more of the good than another country.
B)It can produce a good at a lower opportunity cost relative to another country.
C)It can specialize only in two goods.
D)It always has an absolute advantage in the production of the good.

Question

Quizplus · Accepted Answer

Comparative advantage refers to the ability of a country to produce a specific good or service at a lower opportunity cost, relative to another country. This means that a country can produce a good or service at a lower trade-off than another country. Thus, option B is the correct choice. Options A, C, and D are incorrect because they do not necessarily indicate a country's comparative advantage. A country may produce more of a good than another, but if it has to give up more of another good to do so, it does not have a comparative advantage. Similarly, a country may specialize in only two goods, but it does not necessarily mean that it has a comparative advantage in any particular good. Finally, a country may have an absolute advantage in the production of a good, but it does not necessarily have a comparative advantage.

A Country Has a Comparative Advantage in a Good If