of comparative advantage becomes the proposition that the United States should be a net exporter of goods in which it has a comparative advantage- whether it … B.Mexico has a comparative advantage, and the United States has an absolute advantage in shoes. Chinese workers produce simple consumer goods at a much lower opportunity cost. The United States has a very mature market for government bonds. China, therefore, has a comparative advantage in producing rice. Here's where the notion of comparative advantage comes in. The United States gives up the least to produce a bushel of corn, so it has a comparative advantage in corn production. Therefore, we should have a comparative advantage in things that are produced using a lot of educated people. A contemporary example: China’s comparative advantage with the United States is in the form of cheap labor. The United States can produce either food or computers at a one-to-one trade off. a. The United States has an absolute advantage in producing sugar over all of the other sugar-producing countries. D.Mexico has an absolute and comparative advantage in shoes. On the other hand, the opportunity cost of a banana is 2/3 of a pound of rice in China and 1/2 of a pound of rice in the United States, and the United States has a comparative advantage in producing bananas. America's comparative advantage. Any investor who While the balance of trade in goods is negative, the United States runs a large surplus in the trade in services, reflecting its global comparative advantage in this sector. That bushel of food is the United States' opportunity cost of producing another computer. The domestic supply-and-demand diagram below represents a product in which the United States does not have a comparative advantage. of oil mean that the Middle East has a comparative advantage in oil pro-duction, so Middle Eastern nations export oil to the United States. the domestic price, increasing consumption and … We also have a lot of money that we can spend on capital goods. What impact do foreign imports have on domestic price and quantity? Does this fact mean that we should not … Your answer is correct. In this example, there is symmetry between absolute and comparative advantage. The United States is an abundance of the low priced labor which forces in the production of goods that are human and physical capital intensive with the division of global production as brings the higher global output and the development of new technology has a comparative advantage in the production processes that can make use of less skilled labor … C.There is not enough information to tell. As it turns out, America's manufacturing sector -far from withering in the face of foreign competition - is actually thriving. In other words, if the United States chooses to produce another personal computer, it must give up one bushel of food. This surplus reached $242 billion in 2017, offsetting about 25% of the deficit in the trade of goods. The rigorous way to answer this questions would be to calculate the cost of producing different goods and services in the United States and comparing it to similar costs of production across the world. An example of comparative advantage in financial assets seems a bit more complicated, but the principle emerges nonetheless. A.The United States has an absolute and comparative advantage in shoes.
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