Consider a world with two countries and two goods. Under which of the following conditions does comparative advantage NOT exist?
A) One country can produce both goods more cheaply than the other country.
B) One country has more productive resources or inputs than another country.
C) The opportunity cost of producing each good is the same in each country.
D) One country has an absolute advantage in producing one good while the other country has an absolute advantage in producing the other good.

Question

Quizplus · Accepted Answer

Comparative advantage exists when one country can produce a good at a lower opportunity cost than another country. If the opportunity cost of producing each good is the same in each country, then neither country has a comparative advantage over the other.

Consider a World with Two Countries and Two Goods