Question

If a country has a comparative advantage in the production of a good, then that country

A)also has an absolute advantage in producing that good.

B)should allow another country to specialize in the production of that good.

C)has a lower opportunity cost in the production of that good.

D)all of the above

Answer 1

When there's a comparitive advantage, it doesn't mean to have an absolute advantage as it depends on various factors like technological aspects, skilled labor and raw materials etc. Similarly, if a company has comparitive advantage, it should try to export the product not to make other country specialize in it. However, when the company has comparitive advantage, it has to sacrifice less and therefore, the opportunity cost of the product is low.

Therefore option (c) is the answer for this question.