What is the principle of comparative advantage?

The principle of comparative advantage refers to the ability of an individual or group to carry out a specific economic activity at a lower opportunity cost compared to others. This principle highlights how specialization and trade can benefit all parties involved. When individuals or nations specialize in the production of goods where they have a comparative advantage, they can trade with one another to become more efficient and increase overall economic output.

Choosing option B captures this idea well, as it emphasizes the concept of efficiency in carrying out specific economic tasks relative to others. This principle is foundational in understanding how trade can lead to mutual benefits for different economic agents, as it encourages each party to focus on what they produce best and trade for what they need.

In contrast, the other options do not accurately reflect this principle. For instance, stating that one can produce goods without any input ignores the fundamental economic reality that all production requires some resources. Moreover, the idea of maximizing production by all available resources pertains more to overall production efficiency or resource allocation rather than the comparative aspect of opportunity costs. Lastly, efficiency in short-term economic cycles relates more to fluctuations in economic performance rather than the fundamental principle of comparative advantage, which focuses on the long-term benefits of trade and specialization.