Which of the following best defines the term 'comparative advantage'?

• A. The ability of an individual, firm, or country to produce a good at a lower opportunity cost than others.
• B. The ability to produce a good with fewer inputs than another producer.
• C. The ability of an individual, firm, or country to produce more of a good using the same amount of resources as others.
• D. The ability to consume more goods and services than another producer.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the concept of 'comparative advantage' in microeconomics. It refers to the ability of an individual, firm, or country to produce a good at a lower opportunity cost compared to others.
2. Step 2: Recall that opportunity cost is what you give up to produce one more unit of a good. It is not about the absolute amount of resources used, but about the relative cost in terms of other goods forgone.
3. Step 3: Differentiate 'comparative advantage' from 'absolute advantage'. Absolute advantage means producing more output or using fewer inputs, but comparative advantage focuses on lower opportunity cost.
4. Step 4: Evaluate the given options by checking which one correctly describes the concept of lower opportunity cost rather than just efficiency or consumption capacity.
5. Step 5: Conclude that the best definition of comparative advantage is the ability to produce a good at a lower opportunity cost than others.