Question

If the United States could produce five televisions per hour of labor and China could produce three televisions per hour of labor, would it necessarily follow that the United States should specialize in television production? Why or why not?

Answer 1

Answer:

US specialisation in TV can be stated on the basis of Absolute Advantage, not comparative advantage.

Explanation:

Absolute Advantage is when a country can produce more output per input of a commodity, than other country.

Comparative Advantage is when a country can produce a good at lower opportunity cost (in terms of other sacrifised)

China can produce more (ie 5 units television) per hour employed, compared to US able to produce lesser (3 units) in the same time. So, on the basis of Absolute Advantage, it can be stated that US should specialise in TV production.

However, since other good's details have not been given. So, we cannot attain the relative opportunity costs. Hence, specialisation on the basis of comparative advantage can't be stated.

Answer 2

Countries do have areas of specialization. If the United States could produce five televisions per hour of labor and China could produce three televisions per hour of labor, It would be necessarily that the United States should specialize in television production.

• Based on the fact that United states can produce 5 televisions per hour of labor as compared to 3 televisions per hour of labor in China, The US has an absolute advantage and can therefore specialize in it.

Countries often produce more when they have an advantage. This advantage is known as the ability to a lower production cost of a good when compared to competitors but Comparative advantage is known to the lower opportunity cost of production of some specific goods when compared to competitors.

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