Question

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

Short answer

The statement is False.

Step-by-step solution

Step 1. Absolute advantage and comparative advantage

The absolute advantage states the country can produce the product more efficiently than the competitor country as it uses fewer resources to produce the same amount of goods.

The comparative advantage says that the country can produce at a lower opportunity cost than the competitor country.

Step 2. Explanation

If a country produces a commodity more efficiently, it doesn't need to produce the good at a lower opportunity cost.

Suppose country B has an absolute advantage over country A in making bicycles, which means the input requirement is less and the output is more. It is unnecessary to have a comparative advantage over Country A as the cost of production in countries A and B may differ. Country B can produce more bicycles than country A. However, it can have a higher cost of production than country A because the cost of labour is more in country B. Hence, comparative advantage is not possible. Thus, the statement is false.