True or False. Both Countries would be better off if they produced the good in which they have a comparative advantage and then traded 300 million tons of grain for 200 million cars. Complete the following table by determining the opportunity cost of a car and of a ton of grain for both the United States and Japan.United StatesJapan1 Car1 Ton of Grain(In terms of tons of grain given up) (In terms of cars given up)2M1/211/4 ▼4/5Given this information, Japanin producing grain.Opportunity Cost ofUnited StatesJapanhas an absolute advantage in producing cars, and neither country has an absolute advantageAlso, the United States has a comparative advantage in producing cars, andproducing grain.Assume that without trade, half of each country's workers produce cars and half produce grain.has a comparative advantage inComplete the following table with the quantities of cars produced and consumed in each country if there is no trade.Cars Produced and Consumed Tons of Grain Produced and Consumed(Millions)(Millions) An American worker can produce either 4 cars or 8 tons of grain a year. A Japanese worker can produce either 4 cars or 5 tons of grain a year. To keepthings simple, assume that each country has 100 million workers.Complete the following table with the number of workers needed to make one car or 1 ton of grain in the United States and Japan.Workers Needed to Make1 Car1 Ton of Grain1/81/5United StatesJapanUse the blue line (circle symbol) to graph the production possibilities frontier for the American economy. Then use the green line (triangle symbol) tograph the production possibilities frontier for the Japanese economy.5004501/41/4400U.S.

Given: Production per worker Car Grain (in tons) United state 4 8 Japan 4 5 The total…

Answered: True or False. Both Countries would be…

True or False. Both Countries would be better off if they produced the good in which they have a comparative advantage and then traded 300 million tons of grain for 200 million cars.

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter18: International Trade And Comparative Advantage

Section: Chapter Questions

Problem 2TY

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Concept explainers

Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.

Question

True or False. Both Countries would be better off if they produced the good in which they have a comparative advantage and then traded 300 million tons of grain for 200 million cars.

Complete the following table by determining the opportunity cost of a car and of a ton of grain for both the United States and Japan.
United States
Japan
1 Car
1 Ton of Grain
(In terms of tons of grain given up) (In terms of cars given up)
2M
1/2
11/4 ▼
4/5
Given this information, Japan
in producing grain.
Opportunity Cost of
United States
Japan
has an absolute advantage in producing cars, and neither country has an absolute advantage
Also, the United States has a comparative advantage in producing cars, and
producing grain.
Assume that without trade, half of each country's workers produce cars and half produce grain.
has a comparative advantage in
Complete the following table with the quantities of cars produced and consumed in each country if there is no trade.
Cars Produced and Consumed Tons of Grain Produced and Consumed
(Millions)
(Millions)

An American worker can produce either 4 cars or 8 tons of grain a year. A Japanese worker can produce either 4 cars or 5 tons of grain a year. To keep
things simple, assume that each country has 100 million workers.
Complete the following table with the number of workers needed to make one car or 1 ton of grain in the United States and Japan.
Workers Needed to Make
1 Car
1 Ton of Grain
1/8
1/5
United States
Japan
Use the blue line (circle symbol) to graph the production possibilities frontier for the American economy. Then use the green line (triangle symbol) to
graph the production possibilities frontier for the Japanese economy.
500
450
1/4
1/4
400
U.S.

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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