Question 65

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, allowing it to allocate its resources more efficiently.

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 with a comparative advantage can produce a good while sacrificing less of other goods compared to another country, highlighting the efficiency in resource allocation.

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

This statement is incorrect because having a comparative advantage does not necessarily imply that Country A has an absolute advantage. Absolute advantage refers to the ability to produce more of a good with the same resources, which is a different concept than opportunity cost.

C) Country B cannot produce coffee

This statement is incorrect as it falsely implies that Country B has no capacity to produce coffee. While Country A may have a comparative advantage, it does not negate Country B's ability to produce coffee, albeit at a higher opportunity cost.

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

This statement is incorrect because it contradicts the premise of the question. If Country A has a comparative advantage, it indicates that Country B does not produce coffee more efficiently than Country A, which means Country B does not have an absolute advantage in this context.

Conclusion

The correct answer is definitively right because it accurately captures the principle of comparative advantage, emphasizing opportunity cost rather than sheer production capability. All other options fail to recognize the fundamental economic distinctions that define comparative versus absolute advantage, leading to misconceptions about the competitive capabilities of the countries involved.