17. Which statement is true when Country A has a comparative advantage in the production of coffee compared to Country B
Answer: B
Country A can produce coffee at a lower opportunity cost than Country B.
When Country A has a comparative advantage in the production of coffee, it means that it can produce coffee at a lower opportunity cost compared to Country B. This concept is fundamental in understanding the economic benefits of trade and specialization.
A) Country B has an absolute advantage in the production of coffee.
This statement is incorrect because having a comparative advantage does not imply that Country B possesses an absolute advantage. An absolute advantage refers to a country's ability to produce more of a good with the same resources compared to another country, which is not a requirement for comparative advantage.
B) Country A can produce coffee at a lower opportunity cost than Country B.
This statement is correct and captures the essence of comparative advantage. It highlights that Country A sacrifices less of other goods when producing coffee compared to Country B, making it more efficient in coffee production relative to alternative uses of its resources.
C) Country A has an absolute advantage in the production of coffee.
This statement is incorrect as it conflates absolute advantage with comparative advantage. Country A may or may not have an absolute advantage, but the key point is its lower opportunity cost in coffee production that defines its comparative advantage.
D) Country B cannot produce coffee.
This statement is also incorrect. Just because Country A has a comparative advantage does not mean that Country B is entirely incapable of producing coffee. Country B can still produce coffee but at a higher opportunity cost, making it less efficient in this regard.
Conclusion
The correct answer is that Country A can produce coffee at a lower opportunity cost than Country B, which is the defining characteristic of comparative advantage. All other options either misinterpret the definitions of absolute and comparative advantage or incorrectly state the capabilities of Country B in coffee production. Understanding these distinctions is crucial for analyzing international trade dynamics.