Question

In one hour of labor input, South Korea can produce either 100 computer chips or 50 bed linens. In the U.S., in one hour of labor input, either 150 computer chips or 100 bed linens can be made. Select the correct response below.

1. The U.S. has a comparative advantage in computer chips manufacturing.
2. Both the U.S. and S. Korea have comparative advantages in computer chips manufacturing.
3. S. Korea has a comparative advantage in computer chips manufacturing.
4. S. Korea has an absolute advantage in bed linen production.
5. None of these are correct

Answer 1

The answer is 1. The U.S. has a comparative advantage in computer chips manufacturing

Step-by-step explanation:

Comparative advantage is the ability of an economy or a firmto produce goods and services at a lower opportunity cost than that of trade partners. A comparative advantage gives a company or a country the ability to sell goods and services at a lower price than its competitors.

In the question above, US can produce 150 computer chips in one hour while South Korea can produce 100 computer chips under the same one hour. Therefore, The U.S. has a comparative advantage in computer chips manufacturing