Which of the following statements is true? A) The country with the higher opportunity cost of producing a good has the comparative advantage in producing that good

A) The country with the higher opportunity cost of producing a good has the comparative advantage in producing that good.

Ans: False   

From an economic point of view, a country can produce at a lower opportunity cost than its trading partners and has a comparative advantage. Although a country cannot have a comparative advantage in all goods and services, it can have an absolute advantage in the production of all goods.

B) A country can have a comparative advantage in the production of all goods.

Ans: False

When a country can produce goods at a lower opportunity cost than other countries, there is a comparative advantage. It is impossible for a country to have a comparative advantage in all commodities. However, a country can have an absolute advantage in all commodities

C) A country that has the absolute advantage in producing a good also has the comparative advantage in producing that good.

Ans: False

A country has an absolute advantage in those products that have a productivity advantage compared to other countries; fewer resources are needed to produce the product. A country has a comparative advantage when it can produce other goods at a lower cost.

D) There are mutually beneficial gains from trade if opportunity costs differ.

Ans: True

The fact that the two countries have different opportunity costs shows the possibility of mutually beneficial trade. The opportunities created by trade will cause a greater degree of specialization in the two countries, and this specialization reflects comparative advantages.