The statement which best describes the production of coal and iron by Country A and Country B is: B. Country B has a comparative advantage producing iron.
What is comparative advantage?
Comparative advantage can be defined as a measure of the ability of a particular country or business entity to produce goods and services at a lower opportunity cost in comparison with another country or business entity such as trade partners (close competitors).
The benefits of comparative advantage:
Some of the important benefits of comparative advantage include the following:
- It gives a country the opportunity to sell its finished goods and services.
- Sales of finished goods at a lower price.
- It increases stronger sales margins.
In this scenario, Country A can produce a maximum of 250 tons of iron while Country B can produce a maximum of 300 tons of iron.
Deductively, we can conclude that Country B has a comparative advantage producing iron than Country A.
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