A country possesses a comparative advantage in the production of a good if
A) it possesses an absolute advantage in the production of this good.
B) the opportunity cost in terms of forgone output of alternative goods is lower for this country than it is for its trading partners.
C) it is able to produce more of this good per hour than can any other country.
D) all of the above

Question

Quizplus · Accepted Answer

Comparative advantage is based on opportunity cost. A country has a comparative advantage in producing a good if the opportunity cost in terms of producing alternative goods is lower for this country than its trading partners. This means that the country can produce this good more efficiently and/or at a lower cost than its trading partners. It is not necessary for the country to have an absolute advantage or to produce more of the good per hour than any other country.

A Country Possesses a Comparative Advantage in the Production of a Good