The United States imports televisions from Japan and Japan imports computer chips from the United States. If the theory of comparative advantage guides trade between the two countries, it must be true that

Question

Quizplus · Accepted Answer

The theory of comparative advantage suggests that each country will specialize in and export the good for which it has a lower opportunity cost of production. Since the United States imports televisions from Japan and exports computer chips to Japan, it implies that the U.S. has a comparative advantage in producing computer chips, meaning the opportunity cost of producing computer chips in the U.S. is lower than in Japan.

The United States Imports Televisions from Japan and Japan Imports