American and Japanese workers can each produce 4 cars a year. An American worker can produce 10 tons of grain a year, whereas a Japanese workers can produce 5 tons of grain a year. To keep things simple, assume that each country has 100 million workers. a. For this situation, construct a table analogous to the table in Figure 1. b. Graph the production possibilities frontier of the American and Japanese economies. c. For the United States, what is the opportunity cost of a car? Of grain? For Japan, what is the opportunity cost of a car? Of grain? Put this information in a table analogous to Table
American and Japanese workers can each produce 4 cars a year. An American worker can
produce 10 tons of grain a year, whereas a
Japanese workers can produce 5 tons of grain a
year. To keep things simple, assume that each
country has 100 million workers.
a. For this situation, construct a table analogous
to the table in Figure 1.
b. Graph the
the American and Japanese economies.
c. For the United States, what is the opportunity
cost of a car? Of grain? For Japan, what is the
opportunity cost of a car? Of grain? Put this
information in a table analogous to Table 1.
d. Which country has an absolute advantage in
producing cars? In producing grain?
e. Which country has a comparative advantage
in producing cars? In producing grain?
f. Without trade, half of each country’s workers
produce cars and half produce grain. What
quantities of cars and grain does each country produce?
g. Starting from a position without trade, give
an example in which trade makes each country better off.
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