65. Which statement is true when Country A has a comparative advantage in the production of coffee compared to Country B?
Answer: A
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 indicates that it can produce coffee at a lower opportunity cost compared to Country B, meaning it sacrifices less of other goods to produce coffee.
A) 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. A country has a comparative advantage when it can produce a good at a lower opportunity cost than another country, thereby making this option the accurate representation of the relationship between Country A and Country B regarding coffee production.
B) Country A has an absolute advantage in the production of coffee
This statement is incorrect because having a comparative advantage does not necessarily mean that Country A has an absolute advantage. Absolute advantage refers to the ability to produce more of a good with the same resources compared to another country, which is not specified in the context of the question.
C) Country B cannot produce coffee
This statement is also incorrect as it implies that Country B has no capacity to produce coffee at all, which does not relate to the concept of comparative advantage. Even if Country A has a comparative advantage, it does not mean that Country B lacks the ability to produce coffee altogether.
D) Country B has an absolute advantage in the production of coffee
This statement is incorrect as it contradicts the scenario described. If Country A has a comparative advantage, it may not necessarily imply that Country B has an absolute advantage; it simply indicates a relative efficiency in opportunity costs, not total production capabilities.
Conclusion
The correct answer, A, emphasizes the fundamental principle of comparative advantage, which is based on opportunity costs. Options B, C, and D fail to accurately reflect the definition and implications of comparative advantage, demonstrating a misunderstanding of the concepts of absolute and comparative advantage in international trade.