Which of the following statements is FALSE?
A)Comparative advantage is the principle upon which trade patterns are based.
B)Opportunity cost measures the real cost to a country of producing a certain product.
C)The gains from trade are the result of differences in opportunity cost and comparative advantage.
D)A country that possesses an absolute advantage will always have a comparative advantage.
E)Comparative advantage is necessary and sufficient for trade.

Question

Quizplus · Accepted Answer

A country may have an absolute advantage in producing a certain good, but it may not necessarily have a comparative advantage in producing that good. Comparative advantage is based on opportunity cost, which takes into account the cost of producing one good in terms of the foregone production of another good.

Which of the Following Statements Is FALSE