Question

Comparative Advantage

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Explain: “The United States can make certain toys with greater productive efficiency than can China. Yet we import these toys from China.” Relate your answer to the ideas of absolute and comparative advantage.

Answer 1

Absolue advantage: when a producerA can produce a good or service in higher quantity for the same cost, or the same quantity at lower cost, than other producers then that producer A will be said to have absolute advantge over other producers.
Comparative advantage: An economy's ability to produce goods and services at a lower opportunity cost than that of its trade partners is called the comparative advantage.

The United States can make certain toys with greater productive efficiency than can China. It shows that the US has absolute advantage over china in producing those toys. Yet the US import these toys from China because china can produce them at a lower opportunity cost than US. So as chinal produces those toys with less opportunity cost so china has comparative advantage over USA in producing those products.