Question

If the world price of textiles is higher than Vietnam’s domestic price of textiles without trade, then Vietnam Select one: a. has a comparative advantage in textiles. b. should produce just enough textiles to meet its domestic demand. c. should import textiles. d. should refrain altogether from producing textiles.

Answer 1

a. has a comparative advantage in textiles.

Step-by-step explanation:

If the world average price of textiles is higher than the domestic price in Vietnam, it means that Vietnam has a comparative advantage in producing this good, because textiles are cheaper to make in Vietnam than in the average country of the world.

Textiles are cheaper to produce in Vietnam under this scenario either because labor is cheaper, capital is cheaper, or a combination of both. For this reason, Vietnam should produce more textile goods, in other to meet its domestic demand, and to export.

Answer 2

has a comparative advantage in textiles.

Step-by-step explanation:

Comparative advantage occurs when a particular country has the capability to produce a particular product at a lower cost than any other country.

If a country is capable of producing a particular product at a reduced cost this will lead to an increase in demand for such product thereby leading to an increase in the revenue.

Vietnam has a comparative advantage in the production of textiles because they are able to produce it at a low opportunity cost.