Suppose a producer can produce a product with lower opportunity cost. Which of the following is correct?
A)The producer has a comparative advantage in the production of that good.
B)The producer has an absolute advantage in the production of that good.
C)The producer has both an absolute and comparative advantage in the production of that good.
D)The producer should import that product.

Question

Quizplus · Accepted Answer

Comparative advantage refers to the ability of a producer to produce a good at a lower opportunity cost compared to another producer. Therefore, if a producer can produce a product with lower opportunity cost, it means that they have a comparative advantage in the production of that good. This does not necessarily mean they have an absolute advantage, as another producer could still produce more of the good in absolute terms. Importing the product may or may not be the best choice depending on various factors such as the availability and cost of importing versus producing domestically.

Suppose a Producer Can Produce a Product with Lower Opportunity