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Chapter 15: Problem 4

What does it mean to say that country A has a comparative advantage in the production of computers?

Short Answer

Expert verified
To say that country A has a comparative advantage in the production of computers means that country A can produce computers more efficiently (at a lower opportunity cost) compared to other countries. This could be due to various factors like better technology, more skilled labor, etc. As a result, country A would be able to produce and sell computers more efficiently and at lower costs, thereby increasing its market share in the global computer industry.

Step by step solution

01

Understand the concept of Comparative Advantage

Comparative advantage is an economic term that refers to an economy's ability to produce goods and services at a lower opportunity cost than that of trade partners. A comparative advantage gives a company the ability to sell goods and services at a lower cost than its competitors and realize stronger sales margins.
02

Apply the concept to Country A

When it's said that country A has a comparative advantage in the production of computers, it implies that country A can produce computers at a lower opportunity cost compared to other countries. This might be due to various reasons such as advanced technology, abundance of skilled labour or availability of resources.
03

Explain the effect of this advantage

With a comparative advantage in producing computers, country A would be able to produce and sell computers more efficiently, and at a lower cost relative to other countries. This enables Country A to sell computers at a lower price, boosting its sales and increasing the country's share in the global market for computers.

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