Question

Select a country of your choice (other than Saudi Arabia) and discuss its comparative advantage—the sources and the challenges. What is the role of the government? Does the government provide additional investment? What could increase their advantage?

 

Answer 1

The United States of America possesses labour that can create highly clever and high-quality investments and commodities at a relatively cheap cost of production, implying that labour in America is both cost-effective and widely available. The problem is that other nations with reasonable capital-labour costs, such as Japan and China, can outcompete America (Shen & Gu, 2016). The government's job is to preserve the consumer's competitive advantage by providing products and services at a reduced cost. To boost the economy and defend its worldwide market from the competition, the government must raise funds. When the government expands and adds to its involvement in the market, the advantages gained from foreign markets will be preserved. Comparative advantage is an economic phrase that describes a country's capacity to deliver products and services at a reduced opportunity cost compared to its trade counterparts in the worldwide market. It would boost sales margins, perhaps bringing in more revenues for the country.

This is because the host nation would participate in commerce in areas with a competitive edge, which may be any field of interest. It differs from the absolute advantage in that it refers to a larger volume of output in contrast to trade partners, whereas this refers to a higher sale at a lower opportunity cost in the international market. Consider the United States of America to understand the notion of comparative advantage better. America is seen to have a competitive advantage in specialized and capital-intensive labour. American employees are renowned for producing sophisticated items and investment possibilities at a cheaper cost. This would imply that the American labour group is more dependable in capital goods manufacturing and worldwide marketing, given the international community's interest in the American economy's investment market. Although China, the relative best rival, has a lower capital-labour advantage, this is overshadowed by America's lower opportunity cost in this situation.

In the present circumstance, the government has a significant role to play in preserving the nation's comparative advantage, which would be lost unless adequate assistance is provided in this manner. As a result, budgetary allocations must be evaluated and raised as needed to safeguard a specific economic sector in the international market. For example, while looking at American businesses, it is clear that more resources must be allocated to maintain the labour market that produces such items to continue the production of high-quality goods in that sector (Bhanumurthy & Kumar, 2021). The government's extra investment may come in more significant budgetary allocations and investments in the economy, allowing the industry to benefit from the move. Although strong protectionist policies are unlikely to produce the desired market returns, it is clear that some proactive steps may be taken to ensure that the relative advantage gained is not squandered.

 

The United States of America possesses labour that can create highly clever and high-quality investments and commodities at a relatively cheap cost of production, implying that labour in America is both cost-effective and widely available.