Difficulty: Easy

Average Score: 75%

Which statement is true when Country A has a comparative advantage in the production of coffee compared to Country B

Rationale

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

This statement accurately reflects the definition of comparative advantage, where one country can produce a good at a lower opportunity cost compared to another. In this scenario, Country A's ability to produce coffee more efficiently allows it to specialize in coffee production while benefiting from trade.

A (Country B has an absolute advantage in the production of coffee.) YOUR ANSWER

Absolute advantage refers to a country's ability to produce more of a good with the same resources compared to another country. The question does not provide any information that supports Country B's ability to produce more coffee than Country A, making this statement potentially misleading or incorrect.

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

This statement correctly identifies the essence of comparative advantage. When Country A can produce coffee with a lower opportunity cost than Country B, it means that Country A sacrifices less in terms of alternative goods to produce coffee, making it the more efficient producer in this context.

C (Country A has an absolute advantage in the production of coffee.) YOUR ANSWER

While it is possible for Country A to also have an absolute advantage, the question specifically focuses on comparative advantage. The information given does not confirm that Country A produces more total coffee than Country B, so this statement may not necessarily be true.

D (Country B cannot produce coffee.) YOUR ANSWER

This statement is incorrect as it implies that Country B is entirely incapable of producing coffee. The existence of comparative advantage does not preclude Country B from producing coffee; it simply indicates that Country A does so more efficiently. Country B may still produce coffee, albeit at a higher opportunity cost.

Conclusion

In the context of comparative advantage, the key concept is that Country A can produce coffee at a lower opportunity cost than Country B. This enables Country A to specialize in coffee production effectively, allowing for beneficial trade dynamics. The other options either misinterpret the definitions of comparative and absolute advantage or make unfounded claims about Country B's production capabilities. Understanding these distinctions is crucial for analyzing international trade and economic efficiency.

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