Many of the toy products sold in the United States are imported from Taiwan because the Taiwanese can produce these products more efficiently than U.S. companies. This is an example of

outsourcing.

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Comparative Advatange

comparative advantage.

To understand this concept, we need to explore the principle of comparative advantage. It states that countries tend to specialize in producing goods and services in which they have a lower opportunity cost. The opportunity cost is the value of the next best alternative that is foregone in order to choose a particular option.

In the case of toy products, Taiwan has a comparative advantage over U.S. companies in their production because they can produce these products more efficiently. This means that Taiwan can produce toys at a lower opportunity cost compared to U.S. companies. They may have better access to resources, technological advancements, skilled labor, or favorable production conditions that allow them to produce toys more effectively and efficiently.

As a result, it is more cost-effective for U.S. companies to import toy products from Taiwan instead of producing them domestically. By doing so, they can take advantage of Taiwan's comparative advantage and acquire toys at a lower cost, which can then be sold to consumers at competitive prices in the United States.

This example illustrates the benefits of international trade and specialization. Each country focuses on producing goods and services in which it has a comparative advantage, leading to overall efficiency, lower costs, and increased availability of a variety of products for consumers.