Question

Read through each of the following 3 statements.

Statement I: Even though a country may have no absolute advantage in any

goods, it may have a comparative advantage in some good.

Statement II: If a country has a comparative advantage in some goods, it must have a comparative disadvantage in other goods.

Statement III: Even though a country may have an absolute advantage in all goods, it cannot have a comparative advantage in all goods.

Which of the following statements is correct (pick one only):

a.

Statement I is True.

b.

Statement II is True.

c.

Statement III is True.

d.

Statements I and II are True.

e.

Statements II and III are True.

f.

Statements I and III are True.

g.

Statements I, II, and III are all True.

h.

None of the statements are True.

Answer 1

Ans is F

statement 1 and 3 is true

a country has an absolute advantage in a good if it is more efficient in producing that good compared to other country.

A country will have a comparative advantage in a good in which it has more absolute advantage  or it has least absolute disadvantage.

comparative advantage in a good is found out by comparing the opportunity cost of the good between the countries.

if a country have a comparative advantage in one good then other country will definitely have a comparative advantage in other good.