Questions: A comparative advantage exists when one firm can produce the same output as another firm but with a lower opportunity cost. True False

The answer is True: A comparative advantage exists when one firm can produce the same output as another firm but with a lower opportunity cost.

Explanation:

• Comparative advantage is a key concept in economics that refers to the ability of an entity (such as a firm, country, or individual) to produce a good or service at a lower opportunity cost than another entity. This means that the entity sacrifices less of other goods or services to produce the same output.
• The concept of comparative advantage is central to the theory of international trade, as it suggests that entities should specialize in the production of goods and services for which they have a comparative advantage, and trade with others to obtain goods and services for which they have a comparative disadvantage.
• For example, if Firm A can produce 10 units of Product X by giving up the production of 5 units of Product Y, while Firm B can produce the same 10 units of Product X by giving up 10 units of Product Y, Firm A has a comparative advantage in producing Product X because it incurs a lower opportunity cost.