Answered: A producer has a comparative advantage…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A producer has a comparative advantage in a good if it is the lowest opportunity cost producer of this good, even if it is not the most efficient producer of this good.

True

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Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

Expert Solution

Step 1: Define absolute advantage

It can be defined as a situation in which a particular individual or a producer is able to produce a specific product or service by using less resources or inputs in the production process as compared to the other producers who are producing the same product in the market.

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