Comparative advantage is based on the economic concept of:

A. marginal cost.

B. opportunity cost.

C. nonsatiety

D. rationality.

B. Opportunity Cost

Explanation:

Comparative Advantage is when an economy can produce certain goods & services at a lower opportunity cost than other trading economies.

Opportunity cost is the cost of next best option forgone while choosing a particular option.

Comparative advantage (production ability at lower opportunity cost) implies: Economy can produce a good / service by sacrifising lesser amount of other good, than the other economy.

Example : Production Possibilities of 2 countries, 2 goods : -

Good X Good Y Opportunity Cost (Goods Ratio)

Country A 10 30 1:3 (10/30)

Country B 5 10 1:2 (5/10)

Country A can produce Good Y by sacrifising 3 units of Good X, Country B can produce Good Y by sacrifising 2 units of Good X. So, B can produce good Y at lesser opportunity cost than A. Hence, country B has comparative advantage in good Y.