Question

With an abundance of low-priced labor relative to the United States, it is no surprise that China, India and other developing countries specialize in the production of labor-intensive products. Where does that leave the United States? In what areas will the United States have a comparative advantage?

Answer 1

Just like the developing country like India and China have an abundance of labor which gives these countries a comparative advantage in the production of labor-intensive products. Similarly, the US has a huge comparative advantage in the production of capital-intensive industry. It includes finance and banking sector, research and development of new products.

Us can excel in the production of these goods. As the other countries are not so rich in capital they are not even close the Comparative advantage the US has got in research and development. It takes a lesser amount of capital and ensures higher return in the US on R&D development whihc makes it cheaper and more beneficial than the same activities in the developing country.