Suppose that only two goods are produced in an economy. If a country possesses a comparative advantage at producing one good, then it:
A) must also possess a comparative advantage at producing the other good.
B) must also possess an absolute advantage at producing that good.
C) cannot also possess a comparative advantage at producing the other good.
D) cannot also possess an absolute advantage at producing that good.

Question

Quizplus · Accepted Answer

Possessing a comparative advantage in one good means that the opportunity cost of producing that good is lower than the opportunity cost of producing the other good. This does not necessarily mean that the country has an absolute advantage in producing the first good, and it also does not imply that the country cannot produce the other good. Therefore, it is possible for another country to have a comparative advantage in producing the other good.

Suppose That Only Two Goods Are Produced in an Economy