according to the U.S. census bureau, in july 2006 the us exported aircraft worth
ID: 1250502 • Letter: A
Question
according to the U.S. census bureau, in july 2006 the us exported aircraft worth $1 billion to china and imported aircraft worth $19,000 from china. during the same month, the us imported $83 million worth of men's pants from china, and he US exported $8000 worth of men's pants to china. Based only on this information along with what your have learned about how trade is determined by comparative advantage.a) which country most likely has the comparative advantage in aircraft production?
China/US/No way to know
b)which country most likely has the comparative advantage in production of men's pants?
China/US/No way to know
c)which country most likely has the absolute advantage in aircraft production?
China/US/No way to know
d)which country most likely has the absolute advantage in production of men's pants?
China/US/No way to know
Explanation / Answer
Countries will trade when they have a comparative advantage in the production of a good. In this case where trade is going both ways, the net exports represent the comparative advantage. So here the US would have the comparative advantage in aircraft production since the us exported more than it imported. Conversely, China would have the comparative advantage in production of men's pants since they exported more than they imported. The absolute advantage cannot be determined without knowing the quantities that each country produced. Since trade depends on comparative advantage, information about the absolute advantage would not be reflected in trade data.
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