In a two-nation, two-good world, which of the following statements is true?

A) One nation cannot possibly have an absolute advantage over the other nation in both products.
B) If one nation has the comparative advantage in one product, then the other nation would have the comparative advantage in the other product.
C) One nation will always have the comparative advantage over the other nation in one of the products.
D) If one nation has the absolute advantage in one product, then the other nation would have the absolute advantage in the other product.

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Michael Harkness · Accepted Answer

Final Answer : B, Explanation :  According to the principle of comparative advantage, if one nation has a lower opportunity cost in producing one good than the other nation, then that nation has a comparative advantage in producing that good. Therefore, if one nation has the comparative advantage in one product, then the other nation must have the comparative advantage in the other product. It is possible for one nation to have an absolute advantage in both products, but it is not necessary for this to be the case.

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