Question

True or False: If Country B has an absolute advantage over Country A in producing bicycles, it must also have a comparative advantage over Country A in producing bicycles.

Answer 1

If Country B has an absolute advantage over Country A in producing bicycles, it must also have a comparative advantage over Country A in producing bicycles - False

Explanation:

When any organisation has the ability to produce a product identical to its competitor company in such a way it utilizes only lesser amount of the given resources producing more product then it is said to have absolute advantage.  Comparative advantage refers to the ability of a firm in producing a particular goods or services at a lesser marginal cost when compared with the opportunity cost.

Absolute advantages helps a firm to reduce its production cost than its competitors. Comparative advantage helps a firm in reducing the opportunity cost. It is not necessary to have a company to have both absolute and comparative advantage at the same time. It can either have absolute or comparative advantage.