Question

In: Economics

If the United States could produce five televisions per hour of labor and China could produce...

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?

Solutions

Expert Solution

No, it can't be followed that United States should specialize in television production.

Here we are only talking about the productivity of the labor in terms of production per labor hour. But the other factors are also worth considering. Some of the other major factors worth considering are wages of labor. It may be possible that the wages in China are too low in comparison to the wages in US. The other factor is availability of cheap raw material. The other factors can be cheaper transportation, salary of sales and marketing force, etc.

Explanation:

The other reason to say no is that specialization involves comparative advantage which is measured in terms of opportunity cost. Here not other goods are given to find out the comparative advantage in terms of opportunity cost of producing the televisions. So it will not be wise to say that in the given case United States should specialize in television production.

Rahul Sunny answered 2 years ago
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