Given that the USA is twice as good at making clothing, and 4 times as good...

Given that the USA is twice as good at making clothing, and 4 times as good at making food as Vietnam and they trade, who wins, and who loses according to comparative advantage?

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Expert Solution

There is a competitive advantage always associated with the the country who have lower cost of production and lower cost of living then a country who have a higher market share and higher reputation and a dominating currency but higher cost of production and higher cost of living.

Comparative advantage means that advantage of production of various outputs at lower rate, than the other country so Vietnam is always known for producing food and clothing at a very minimal rate than United States so Vietnam will always be having a competitive advantage in relation to United States in regards to food and clothing industry, even if the United States is four times larger or two times larger.

Competitive advantages is not about having a higher market share but it is about producing the output at a cheaper rate, and the output also have the quality of similar nature, So Vietnam will have a competitive advantage.

jeff jeffy answered 1 year ago

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