Which statement describes comparative advantage?

Which statement describes comparative advantage?

• A. A country can produce more total outputs of a good or service with a given amount of time or resources.
• B. A country is unable to produce efficiently.
• C. A country can trade without any cost.
• D. A country can produce a good at a lower opportunity cost than another.

Answer: (D)

Comparative advantage is about opportunity costs. A country has a comparative advantage in producing a good if it can do so at a lower opportunity cost than another country—meaning it sacrifices less of other goods to produce one unit of that good. This is exactly what the statement describes: producing a good at a lower opportunity cost than another. The idea explains why trade can make both sides better off, even if one country is more productive in every good. The other options point to absolute advantage (producing more with the same resources) or assume zero trade costs or inefficiency, which don’t define comparative advantage.

Comparative advantage is about opportunity costs. A country has a comparative advantage in producing a good if it can do so at a lower opportunity cost than another country—meaning it sacrifices less of other goods to produce one unit of that good. This is exactly what the statement describes: producing a good at a lower opportunity cost than another. The idea explains why trade can make both sides better off, even if one country is more productive in every good. The other options point to absolute advantage (producing more with the same resources) or assume zero trade costs or inefficiency, which don’t define comparative advantage.