Question

A product's components are manufactured in a country that can produce them at a very low cost while maintaining its quality. These components are then assembled in another country where productivity in assembly is high. This process resembles the theory of ________.

Answer 1

Answer:

comparative advantage

Explanation:

Based on the information provided within the question it can be said that this process resembles the theory of a comparative advantage. This is a law that states that when there is free trade a country will produce more of a good but consume less of it when a comparative advantage exists. Usually due to there being a low opportunity cost such as in this scenario.

Answer 2

Answer:

theory of comparative advantage

Explanation:

David Ricardo was the first economist to introduce the theory of comparative advantages in order to explain trade between nations.

Nations will not necessarily export those goods at which they have an absolute advantage in their production, since resources are scarce for everyone, countries should export only those products at which they hold a comparative advantage in their production.

In this case, the country that manufactures the components has a comparative advantage in their production (lower opportunity cost in manufacturing components), while the other country has a comparative advantage in the assembly of the parts (lower opportunity cost in assembly processes).