Question

If labor in Mexico is less productive than labor in the United States in all areas of production, a. then neither nation can benefit from trade. b. then Mexico can benefit from trade but the United States cannot. c. then the United States will have a comparative advantage relative to Mexico in the production of all goods. d. then both Mexico and the United States still can benefit from trade.

Answer 1

Answer:

the correct answer is c. then the United States will have a comparative advantage relative to Mexico in the production of all goods.

Explanation:

If you can see, the question directly states that the mexico is less productive, this means that when the labor is used in the production of goods and services, the production of such goods become ineffective comparatively to USA as well.

So it is reasonable to conclude that the USA have comparative advantage over goods produced relatively to mexico, but this will be mainly seen in laour intensive goods.