Question

Suppose a small country has a comparative advantage in the production of consumer electronics, and it has one major electronics firm that produces far more consumer electronics than the population can consume. This country exports a large quantity of consumer electronics but also imports a large quantity. Which statement best explains why the country imports consumer electronics?

a. Imports create greater competition in the domestic marketplace.
b. Other countries may have trade barriers blocking imported consumer electronics.
c. This country has both an absolute and a comparative advantage in this industry.
d. The government allows its one consumer electronics firm to enjoy a regulated monopoly.

Answer 1

a. Imports create greater competition in the domestic marketplace.

Step-by-step explanation:

The company in the center of discussion has competitive advantage in producing electronics then means it is cheap for them to produce locally

We can define comparative advantage is an economic terminology that make to an economy's ability to produce goods and services at a cheaper cost than that the one of their trade partners. Comparative advantage also gives a company the ability to be able to sell goods and services at a cheaper price than that of its competitors and also realize broad sales margins.

Answer 2

Imports create greater competition in the domestic marketplace.

Step-by-step explanation:

Comparative advantage is defined as the ability of a company to produce goods at a lower opportunity cost than other competitors. They can now sell the goods at lower prices.

If the company in this scenario have competitive advantage in producing electronics then it is xheap for them to produce.

When they export electronics and import again, it can only mean that the imported electronics have a competitive edge that the company wants to take advantage of. For example higher quality than what is available locally.