Vietnam has an advantage in producing clothing because of lower labor costs. What kind of advantage is this?

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The question asks about the type of economic advantage Vietnam has due to lower labor costs in clothing production.
Option 1: economic advantage. This is a very general term and does not specify the source of the advantage. While lower labor costs can contribute to an economic advantage, the more precise economic concept here is how the country compares to others in production relative to opportunity costs, not just overall wealth or advantage.
Option 2: comparative advantage. This is the correct framing. Comparative advantage occurs when a country can produce a good at a lower opportunity cost than its trading partners. Lower labor costs give Vietnam a lower cost of producing clothing relative to other goods or to other countries, making clothing production comparatively more efficient and advantageous for exporting, assuming relative costs and trade-offs are considered.
Option 3: competitive advantage. This term is often used in business strategy to describe a firm's or industry's ability to outperform rivals in a market, usually through differentiation, branding, or efficiency. While relevant to firms, it is not the standard economic term describing why a country specializes in a production activity due to relative costs.
Option 4: absolute advantage. This refers to a country’s ability to produce more of a good with the same quantity of resources, or using fewer resources overall. Lower labor costs can contribute to efficiency but do not by themselves guarantee an absolute advantage unless Vietnam could produce clothing with fewer resources per unit than any other country for all inputs. In international trade theory, clothing production is typically cited as a case of comparative but not necessarily absolute advantage, since other factors like capital, technology, and trade-offs influence relative productivity.
In summary, the scenario illustrates that Vietnam has a lower opportunity cost in clothing production due to its labor efficiency, which aligns with the concept of comparative advantage rather than the broader or different notions of economic, competitive, or absolute advantages.

2025SU BSN 100 01 GRADED Quiz: Chapter03

Vietnam has an advantage in producing clothing because of lower labor costs. What kind of advantage is this?

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