Assume the nation of Teeveeland does not trade with the rest

Assume the nation of Teeveeland does not trade with the rest of the world. By comparing the world price of televisions to the price of televisions in Teeveeland, we can determine whether consumer surplus exceeds producer surplus in Teeveeland. Teeveeland has an absolute advantage in producing televisions. 6 Teeveeland has a comparative advantage in producing televisions. 4) All of the above are correct.

Solution

Answer. 3- Teeveeland has a comparative advantage in producing televisions.

The focus on the production of those goods for which a nation\'s resources are best suited is called specialization. When economists refer to specialization, they mean the increase in productive skill that is achieved from focused repetition in producing a good or service. A country specializes when its citizens or firms concentrate their labor efforts on a relatively limited variety of goods. Historically, specialization arose as a result of different cultural preferences and natural resources.

Given limited resources, a nation\'s choice to specialize in the production of a particular good is also largely influenced by its comparative advantage. Whereas absolute advantage refers to the superior production capabilities of one nation versus another, comparative advantage is based on the concept of opportunity cost. The opportunity cost of a given option is equal to the forfeited benefits that could have been gained by choosing the alternative. If the opportunity cost of choosing to produce a particular good is lower for one nation than for others, then that nation is said to have a comparative advantage.