Question

Over several decades, some industries, such as textile and clothing, which were once a significant part of the U.S. economy, have shifted manufacturing abroad. Using the idea of opportunity cost, provide an explanation of the reasoning behind this shift. How has this shift affected economic well-being locally

Answer 1

Opportunity costs are the benefits lost or extra costs associated to choosing one activity or investment over another alternative.

In this case, the textile and clothing industry was replaced by more modern industries or services that require less labor, probably less capital and less natural resources. This means that the opportunity cost of producing clothes was too high when it meant that it had to replace other more profitable industries.

On the other hand, the opportunity cost of the clothing industry abroad is very low since labor is very cheap compared to the US, so some foreign countries have a comparative advantage.

When you are allocating resources efficiently, you will allocate them to activities that yield the highest returns and reject those that yield low returns. This improves the well being of the companies and the population as a whole.

Step-by-step explanation: