If with one unit of labor the U.S. can produce 20 units of computer software and 10 units of computer hardware and China can produce 6 units of software and 6 units of hardware then trade can make

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Quizplus · Accepted Answer

Comparative advantage theory states that trade can make both countries better off by allowing them to specialize in producing goods that they have a lower opportunity cost for. In this scenario, the U.S. has a comparative advantage in producing software and China has a comparative advantage in producing hardware. By specializing in the production of the goods that they have a comparative advantage in, both countries can increase their output and overall welfare. Therefore, both the U.S. and China can be better off through trade.

If with One Unit of Labor the U