Is it possible for a country to have a comparative advantage in producing a good

Question

Is it possible for a country to have a comparative advantage in producing a good without also having an absolute advantage? A country without an absolute advantage in producing a good…

1. will have a comparative advantage if it is able to produce that good at a low total cost.
2. will have a comparative advantage if it produces more efficiently.
3. will have a comparative advantage if it devotes more resources toward that good’s production.
4. will have a comparative advantage if it has a lower opportunity cost of producing that good.
5. will not have a comparative advantage because it has fewer resources.

Explanation / Answer

answer : option 4

reason:

according to law of comparative advantage , even if one nation is less effeicient than other in the production of both goods , first nation can specialize in the production of and export the commodity in which its absolute disadvantage is smaller.

haberler in 1936 based the theory of comparative adventage on theory of oppprtunity cost.

according to opportunity cost theory , the cost of a commodity is the amount of second commodity that must be given up to release enough resources to produce one additional unit of the first commodity.

consequently , the nation with lower opportunity cost in the production of a commodity has a comparative advantage in the commodity.

for e.g. if in the absence of trade the US has opportunity cost of wheat is 2/3 of unit of cloth ( 1W= 2/3 C). if in UK ,1W = 2C. then opportunity cost of wheat is lower in US than in UK, US would have comparative adventage in wheat.

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