Individuals A and B can both produce goods X and Y.Individual A has a comparative advantage in the production of X if

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Quizplus · Accepted Answer

Comparative advantage is determined by the opportunity cost of producing a good. The opportunity cost is the amount of one good that must be given up to produce one unit of another good. The producer with the lower opportunity cost has the comparative advantage in production of that good. So, in this case, if the amount by which A must reduce production of Y is less than the amount by which B must reduce production of Y to produce an additional unit of X, then A has a lower opportunity cost of producing X and, therefore, has a comparative advantage in the production of X.

Individuals a and B Can Both Produce Goods X and Y.Individual