Question

“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

It can be mentioned that the given statement says about the absolute advantage where the productive efficiency is greater than that of China but you still input because here comparative advantage comes into play where the opportunity cost of producing one toy in United States is more than that of China and because you sacrifice more to produce one toy in your country which is the opportunity cost than that of China you believe that this is not worth that and that is the reason why you import the toys from China and produce the goods in which you have comparative advantage or less opportunity cost. That is the reason why you import toys from China.