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

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Quizplus · Accepted Answer

The theory of comparative advantage suggests that each country will specialize in and export the goods for which it has a lower opportunity cost of production. Therefore, if the United States exports computer chips to China, it implies the U.S. has a comparative advantage in producing computer chips, meaning the opportunity cost of producing them is lower in the U.S. than in China. Conversely, if China exports DVD recorders to the U.S., it suggests China has a comparative advantage in producing DVD recorders.

The United States Imports DVD Recorders from China and China