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Consider a Samsung mobile phone assembled in Vietnam. Components are separately shipped to the factory in Vietnam for assembly. The table below lists the cost and country of origin for some the parts used (ignoring parts not listed). Country of origin Cost of componentDisplay Vietnam $70Image sensors Japan $40Processor South Korea $90Storage South Korea $15The assembled product is valued at $400 and shipped to South Korea for sale at $699.   Based on the transactions described above, which one of the following statements is true? Group of answer choicesThis leads to an increase, or positive change, in South Korea's trade balance.South Korean export increases by $105.Vietnamese export increases by $330.Japanese export increases by $400.

Question

Consider a Samsung mobile phone assembled in Vietnam. Components are separately shipped to the factory in Vietnam for assembly. The table below lists the cost and country of origin for some the parts used (ignoring parts not listed). Country of origin Cost of componentDisplay Vietnam 70ImagesensorsJapan70Image sensors Japan 40Processor South Korea 90StorageSouthKorea90Storage South Korea 15The assembled product is valued at 400andshippedtoSouthKoreaforsaleat400 and shipped to South Korea for sale at 699.   Based on the transactions described above, which one of the following statements is true? Group of answer choicesThis leads to an increase, or positive change, in South Korea's trade balance.South Korean export increases by 105.Vietnameseexportincreasesby105.Vietnamese export increases by 330.Japanese export increases by $400.

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Solution

First, let's understand the role of each country in this transaction:

  1. Vietnam: Provides a display component worth $70 and assembles the phone.
  2. Japan: Provides image sensors worth $40.
  3. South Korea: Provides a processor worth 90andstorageworth90 and storage worth 15, totaling $105.

Then, we see that the assembled product is valued at 400,meaningVietnamexportsthis400, meaning Vietnam exports this 400 product to South Korea.

Finally, South Korea sells the phone at $699.

Based on this information, we can analyze each option:

  1. This leads to an increase, or positive change, in South Korea's trade balance: This statement is likely correct. South Korea sells the phone for 699,whilethetotalimportcostis699, while the total import cost is 225 (70fortheVietnamesecomponent,70 for the Vietnamese component, 40 for the Japanese image sensors, and $105 for the South Korean components).

  2. South Korean export increases by 105:Thisstatementisincorrect.SouthKoreaisimportingcomponentsworth105: This statement is incorrect. South Korea is importing components worth 225 and then exporting a phone worth $699.

  3. Vietnamese export increases by 330:Thisstatementisincorrect.Vietnamisexportingaphoneworth330: This statement is incorrect. Vietnam is exporting a phone worth 400.

  4. Japanese export increases by 400:Thisstatementisincorrect.Japanisexportingimagesensorsworth400: This statement is incorrect. Japan is exporting image sensors worth 40.

So, based on the transactions described above, the correct statement is "This leads to an increase, or positive change, in South Korea's trade balance."

This problem has been solved

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