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9 December, 10:28

Suppose the U. S. and Japan can both produce airplanes and televisions and the U. S. has a

comparative advantage in the production of airplanes while Japan has a comparative advantage in the

production of televisions. Also suppose the U. S. has an absolute advantage in the production of both

airplanes and televisions. The U. S. should

a. not trade airplanes or televisions with Japan.

b. import airplanes from Japan and export televisions to Japan.

c. export airplanes to Japan and import televisions from Japan.

d. export both airplanes and televisions to Japan.

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Answers (1)
  1. 9 December, 13:33
    0
    Answer: Option (c) is correct.

    Explanation:

    A country has a comparative advantage in producing a commodity if the opportunity of producing that commodity in terms of other commodity in that country is lower than the other country.

    In our case, U. S. has a comparative advantage in producing airplanes. Therefore, U. S exports airplanes to Japan and import televisions from Japan. On the other hand, Japan has a comparative advantage in producing televisions. Therefore, Japan exports televisions to U. S and import airplanes from U. S.

    A country has a absolute advantage in producing a commodity if its production requires fewer inputs than the other country. Absolute advantage doesn't affect the pattern of trade.
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