Which of the following statements about competitive advantage is true?

• A. Competitive advantage means producing more of all goods than other countries.
• B. A country has a competitive advantage if it can produce a good at a lower opportunity cost than other countries.
• C. Competitive advantage is the same as absolute advantage.
• D. A country with competitive advantage always has the lowest production costs for every good.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of competitive advantage. Competitive advantage occurs when a country can produce a good at a lower opportunity cost compared to other countries, meaning it sacrifices less of other goods to produce that good.
2. Step 2: Differentiate competitive advantage from absolute advantage. Absolute advantage refers to the ability to produce more of a good with the same resources, while competitive advantage focuses on lower opportunity cost, not necessarily higher output.
3. Step 3: Analyze the statement 'Competitive advantage means producing more of all goods than other countries.' This describes absolute advantage, not competitive advantage, so it is false.
4. Step 4: Evaluate the statement 'Competitive advantage is the same as absolute advantage.' Since these concepts differ (opportunity cost vs. total output), this statement is false.
5. Step 5: Consider the statement 'A country with competitive advantage always has the lowest production costs for every good.' Competitive advantage applies to specific goods based on opportunity cost, not all goods, so this statement is false.