A producer with a comparative advantage has the ability to produce a good or service at:

• A. a lower absolute cost than other producers
• B. a lower opportunity cost than other producers
• C. the same opportunity cost as other producers
• D. a higher output level than other producers

Answer: (B)

Verified step by step guidance

1. Understand the concept of comparative advantage: it refers to the ability of a producer to produce a good or service at a lower opportunity cost compared to others.
2. Recall the definition of opportunity cost: it is the value of the next best alternative foregone when making a choice.
3. Compare comparative advantage with absolute advantage: absolute advantage means producing more output or at a lower absolute cost, but comparative advantage focuses on lower opportunity cost, not necessarily absolute cost or output.
4. Analyze the options given: the correct definition of comparative advantage is having a lower opportunity cost than other producers, not necessarily a lower absolute cost or higher output.
5. Conclude that the producer with a comparative advantage specializes in the good or service for which they have the lowest opportunity cost, enabling more efficient trade and production.