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    Theories of comparative advantage

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    2. How would each of the following theories of comparative advantage explain the fact that the United States exports computers?

    a. Productivity differences
    b. Factor abundance
    c. Human Skills
    d. Product life cycle
    e. Preferences

    13. Suppose the world price of kiwi fruit is $20 per case and the U.S. equilibrium price with no international trade is $35 per case. If the U.S. government had previously banned the import of kiwi fruit but then imposed a tariff of $5 per case and allowed kiwi imports, what would happen to the equilibrium price and quantity of kiwi fruit consumed in the United States?

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    Solution Preview

    2. How would each of the following theories of comparative advantage explain the fact that the United States exports computers?

    a. Productivity differences - production technologies are the primary reason for comparative advantage. A country which can produce wheat at a lower relative cost in terms of corn than other countries will benefit by exporting wheat. In the same way, if the US has production technologies related to computer manufacture that makes it less expensive in terms of other goods to produce them in the US, then it will export computers
    b. Factor abundance - The US has relatively higher capital ...

    Solution Summary

    Theories of comparative advantage are applied to U.S. computer exports; effects of tariffs on kiwi imports

    $2.19