Answered: Indeed US is spending billions of…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter28: International Trade

Section: Chapter Questions

Problem 2P

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Question

Indeed US is spending billions of dollars with other countries for things we need. However, the open trade and the trade agreements allow US also to use its comparative advantage and export the products or services that we have better technology and thus cheaper to provide. For example, we have a comparative advantage on computer technology. Wouldn't this lead to overall benefits for all?

Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

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