Which of the following can never be true? Americans in 2019 had a comparative advantage over...

Which of the following can never be true?

Americans in 2019 had a comparative advantage over the Swedes in producing lumber but in 2020 have a comparative disadvantage to the Swedes in producing lumber.

Americans have a comparative disadvantage in the production of every good or service that it is possible to produce.

Americans’ average wages rise when Americans start trading more with low-wage countries.

China’s current-account surplus and China’s capital-account deficit both increase simultaneously and by the exact same amount.

Solutions

Expert Solution

Ans: Option B: Americans have a comparative disadvantage in the production of every good or service that it is possible to produce.

Explanation:

In a 2 country - 2 product space, the theory of comparative advantage states that if a country has a comparative advantage in any particular product then the other country must have a comparative advantage in the production of another good. This is why it is termed as comparative advantage i.e. it suggests whether a country has a comparatively better position in producing any good ( which means that country has to sacrifice less of another good for the production of that good in which the country has a comparative advantage).

No, matter if we move from 2country-2product space to N country-M Product space the theory remains same and thus any particular country among N countries must have a comparative advantage in the production of at least any (may have more) of the M products.

And for other options:

In the case of Option A, it can happen if the technology or labor productivity improved somehow.

For Option D it is a must for maintaining Balanced BoP.

Again option C is pbvious too.

Rahul Sunny answered 1 year ago

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