If Japan is twice as good at producing cameras and three times as good at producing TV sets as the United States, Japan is said to have a comparative advantage in TV sets and the United States has a comparative advantage in cameras.

Question

Quizplus · Accepted Answer

According to the principle of comparative advantage, a country should specialize in and produce goods and services for which it has a lower opportunity cost, relative to other countries. In this scenario, Japan has a lower opportunity cost in producing TV sets (compared to cameras) as it is more efficient in producing them than the US (since it is twice as good as the US in cameras and three times as good in TV sets). Therefore, Japan has a comparative advantage in TV sets, while the US has a comparative advantage in cameras.

If Japan Is Twice as Good at Producing Cameras and Three