Consider the following statements. (i.) A country is said to have an absolute advantage in producing...

Consider the following statements.

(i.) A country is said to have an absolute advantage in producing a particular good if it can produce it at the lowest possible opportunity cost than is possible elsewhere.

(ii.) A country has an absolute advantage in a particular good if it can produce the same amount of that good using fewer inputs than is possible elsewhere or if it can produce more of that good using the same amount of resources than is possible elsewhere.

(iii.) A country that has an absolute advantage in both goods will also have a comparative advantage in both goods.

Choose the best answer.

a. Statements (ii) and (iii) are true.

b. Statements (i) and (ii) are true.

c. Only Statement (ii) is true.

d. Only Statement (i) is true.

Expert Solution

The answer is (c) only statement (ii) is true

A country has an absolute advantage if it can produce more than the other country with the same amount of resources

(i) is false as a lower opportunity cost means a comparative advantage

(iii) is false as a country can not have comparative advantage in both goods

Rahul Sunny answered 2 years ago

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