Question 21

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 more efficiently relative to the alternatives it must forego compared to Country B. This efficiency is characterized by a lower opportunity cost in coffee production.

A) Country A has an absolute advantage in the production of coffee

This statement is incorrect because having a comparative advantage does not necessarily imply an absolute advantage. An absolute advantage refers to the ability to produce more of a good with the same resources, while comparative advantage focuses on the opportunity costs of production.

B) Country A can produce coffee at a lower opportunity cost than Country B

This statement is correct as it directly defines the essence of comparative advantage. It highlights that Country A sacrifices less in terms of other goods when producing coffee, making it more efficient in that particular production compared to Country B.

C) Country B has an absolute advantage in the production of coffee

This statement is incorrect in the context of the question. The presence of comparative advantage for Country A suggests that Country B does not have an absolute advantage in coffee production, as that would contradict the comparative advantage principle.

D) Country B cannot produce coffee

This statement is also incorrect. The premise of the question does not imply that Country B is unable to produce coffee; rather, it indicates that Country A is relatively better at producing it compared to Country B.

Conclusion

The statement that Country A can produce coffee at a lower opportunity cost than Country B is the defining characteristic of comparative advantage. All other options fail to accurately describe the relationship between the two countries in terms of production efficiency, thereby reinforcing the accuracy of the correct answer.