If the U.S. can produce a combination of 10 shirts or 10 TVs and Mexico can produce a combination of 9 shirts or 5 TVs, then what should the U.S. do?
A) The U.S. should produce both shirts and TVs and export them to Mexico.
B) The U.S. should export shirts to and import TVs from Mexico.
C) The U.S. should import shirts from and export TVs to Mexico.
D) The U.S. should not trade with Mexico because they are self-sufficient.
E) Mexico should not trade with the U.S.

Question

Quizplus · Accepted Answer

The U.S. has an absolute advantage in producing both shirts and TVs but has a comparative advantage in producing TVs because it gives up fewer shirts to produce an additional TV compared to Mexico. Mexico has a comparative advantage in producing shirts because it gives up fewer TVs to produce an additional shirt compared to the U.S. Therefore, the U.S. should specialize in producing TVs, export them to Mexico, and import shirts from Mexico.

If the US Can Produce a Combination of 10 Shirts or 10