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?

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Answer 1

In this case the labour is more productive in the United States as compared to China because the United States can produce five television per hour of labour and China can produce only three television per hour of labour ,therefore, we can say that the United States has an absolute advantage in the production of television. So, the United States should specialise in the television production. Also, when we have more information about the production of other commodities in the United States and China then it is not necessarily true for the United States to specialise in the production of television because in that case we can use the comparative advantage, in order to tell, which good should be produced in the United States and in China.