Which of the following statements best describes a comparative advantage?
Comparative advantage is a fundamental concept in economics that refers to the ability of a country, firm, or individual to produce a particular good or service at a lower opportunity cost than others. This concept is crucial for understanding international trade and the benefits of specialization. To determine which statement best describes a comparative advantage, let’s examine each option and compare them.
Option A: “A country has a comparative advantage in a good if it can produce that good with fewer resources than other countries.”
This statement accurately captures the essence of comparative advantage. It emphasizes the idea that a country can specialize in producing a good if it requires fewer resources (including labor, capital, and land) compared to other countries. This lower opportunity cost allows the country to trade the good for other products it cannot produce as efficiently.
Option B: “A country has a comparative advantage in a good if it can produce that good with higher quality than other countries.”
While quality is an important factor in international trade, it is not the primary focus of the comparative advantage concept. Comparative advantage is about the efficiency of production, not the quality of the final product. Therefore, Option B does not fully describe a comparative advantage.
Option C: “A country has a comparative advantage in a good if it can produce that good with lower prices than other countries.”
Lower prices can be a result of comparative advantage, but they are not the defining characteristic. Comparative advantage is about the opportunity cost of production, not the final price. Therefore, Option C does not provide a comprehensive description of comparative advantage.
Option D: “A country has a comparative advantage in a good if it can produce that good with a larger market share than other countries.”
Market share is not directly related to comparative advantage. Comparative advantage is about the efficiency of production, not the size of the market. Therefore, Option D does not accurately describe a comparative advantage.
In conclusion, Option A (“A country has a comparative advantage in a good if it can produce that good with fewer resources than other countries”) best describes the concept of comparative advantage. It highlights the efficiency of production and the opportunity cost of resources, which are the core aspects of this economic principle.
