Question

Which of the following statements is always true?

A. Absolute advantage implies comparative advantage.

B. Comparative advantage does not require absolute advantage.

C. Absolute advantage requires comparative advantage.

D. Comparative advantage requires absolute advantage.

Answer 1

Answer: Option (B) is correct.

Step-by-step explanation:

A country has a comparative advantage in producing a commodity if the opportunity cost of producing that commodity in terms of other commodity is lower in that country as compared to the other country.

A country has a absolute advantage in producing a commodity if the resources required to produce a unit of commodity is less than the other country.

Comparative advantage determines the country's specialization by comparing opportunity cost whereas absolute advantage determines country's productivity.

So, comparative advantage doesn't require absolute advantage.