If Country A has a comparative advantage in the production of oil relative to Country B,then

Question

Quizplus · Accepted Answer

If Country A has a comparative advantage in the production of oil, it means that it can produce oil at a lower opportunity cost than Country B. This also implies that the opportunity cost of producing other goods in Country A is higher than in Country B. Therefore, Country A has a lower opportunity cost of producing oil and hence, it has a comparative advantage in producing oil. This does not necessarily mean that Country A has an absolute advantage in producing oil or any other good. Therefore, option A and B can be eliminated. Option C is incorrect because the opportunity cost of producing oil is lower in Country A. Option E is also incorrect because there is no necessary relationship between comparative advantage and absolute advantage in other goods.

If Country a Has a Comparative Advantage in the Production