Question

It costs a television manufacturer $1,000 to produce a plasma television. This manufacturer sells these televisions abroad for $750. This is an example of...

a) Trade surplus
b) Trade deficit
c) Comparative advantage
d) Dumping

Answer 1

Germany has a comparative advantage in the production of televisions.

Step-by-step explanation:

To determine which country has a comparative advantage in the production of televisions, we need to calculate the opportunity cost of producing one additional television set in Germany and in Poland. The opportunity cost is the value of the next best alternative that must be given up to produce something. Let's assume that Germany can produce 10 additional television sets or 5 video cameras with the same resources that would produce one television set in Poland. In this case, the opportunity cost of producing one additional television set in Germany is 5/10 = 1/2 video camera. On the other hand, the opportunity cost of producing one additional television set in Poland is 10/5 = 2 video cameras. Therefore, Germany has a comparative advantage in the production of televisions.