Answered: Suppose that each country decides to…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that each country decides to specialize in the production of the good un which it has the comparative advantage. by specializing, what is the total world production of the car parts and aircraft parts?

Production Possibilities (Industrial)
Car
Aircraft
Japan
250
150 - 00
Sweden
100
300
200

Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

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Step 1

Given:

Production possibility:

	Car	Aircraft
Japan	250	150
Sweden	100	300

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