Question

Suppose that Japan can produce 5 cars in 8 hours and 15 HD TVs in 10...

Suppose that Japan can produce 5 cars in 8 hours and 15 HD TVs in 10 hours. The US can produce 5 cars in 6 hours and 15 TVs in 5 hours. Explain which country has a comparative advantage in producing cars and which country has a comparative advantage in producing TVs. In your answer, be sure to be very specific as to how you identified the comparative advantage in each country and define how one goes about identifying comparative advantage.

Homework Answers

Answer #1

If there is 1 hour of production:

Cars produced by Japan = 5/8 = .625 cars

HD TV produced by Japan = 15/10 = 1.5 HD TVs

Further,

Cars produced by US = 5/6 = .83 cars

HD TV produced by US = 15/5 = 3 HD TVs

So,

Opportunity cost of a car for Japan = 1.5/.625 = 2.4 units of HD TVs

Opportunity cost of car for US = 3/.83 = 3.61 units of HD TV

Since, Japan has lower opportunity cost of producing cars, so Japan has comparative advantage in producing cars.

Opportunity cost of a HD TV for Japan = .625/1.5 = .42 units of car

Opportunity cost of a HD TV for US = .83/3 = .28 units of car

Since US has lower opportunity cost of producing HD TVs, so US has comparative advantage in producing HD TVs.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Suppose each worker in the home country can produce 2 cars or 10 TVs, and each...
Suppose each worker in the home country can produce 2 cars or 10 TVs, and each worker in the foreign country can produce 10 cars or 2 TVs. Assume that the total number of workers in both countries is 100. Suppose the world price of car relative to TV with free trade is 2. 1. Which good will each country produce, export and import? Explain your reasoning. 2. Calculate the quantities of output of cars and TVs in the world...
Canadian and Japanese workers can each produce 4 cars per year. A Canadian worker can produce...
Canadian and Japanese workers can each produce 4 cars per year. A Canadian worker can produce 10 tonnes of grain per year, whereas a Japanese worker can produce 5 tonnes of grain per year. To keep things simple, assume that each country has 100 million workers. Graph the production possibilities frontier of the Canadian and Japanese economies. For Canada, what is the opportunity cost of a car? Of grain? For Japan, what is the opportunity cost of a car? Of...
Brazil can produce 100 pounds of beef or 10 cars; in contrast, the United States can...
Brazil can produce 100 pounds of beef or 10 cars; in contrast, the United States can produce 40 pounds of beef or 30 cars. 1- Draw the production possibility frontier for each country with beef on the horizontal axis. 2- What is the opportunity cost of one unit of beef in Brazil? 3- What is the opportunity cost of one car in Brazil? 4- What is the opportunity cost of one unit of beef in the US? 5- What is...
If there are only two countries and two goods in a highly simplified world, America can...
If there are only two countries and two goods in a highly simplified world, America can produce at most 200 cars or at most 100 tons of grain per year, whereas Japan can produce at most 400 cars or at most 50 tons of grain per year. a. Draw the linear production possibility frontier for the American economy. (Please use vertical axis to represent cars and use horizontal axis to represent grain.) b. Draw the linear production possibility frontiers for...
Consider a Ricardian world consisting of U.S. and Japan. Both countries produce and consume the same...
Consider a Ricardian world consisting of U.S. and Japan. Both countries produce and consume the same two goods: cars and computers. In U.S., it takes 200 hours of labor to make a car, and 50 hours of labor to make a computer. In Japan, it takes 200 hours of labor to make a car, and 100 hours of labor to make a computer. Each country has 2 billion hours of labor. a. What would the autarky equilibrium (i.e., the amount...
Consider two countries: The Netherlands and Germany. - Each country can produce bicycles and cars by...
Consider two countries: The Netherlands and Germany. - Each country can produce bicycles and cars by its resources. - If Germany allocates all of its resources to car production, it can produce 16 cars and hence no bicycles. And if Germany decides to allocate all resources to produce bicycles, it can produce 8 bicycles and hence, no cars. - If the Netherlands allocates all of its resources to produce cars, it can produce 10 cars and hence no bicycles. And...
Ricardian Model Suppose US (N) and Mexico (S) both can produce soccer balls (SB) and footballs...
Ricardian Model Suppose US (N) and Mexico (S) both can produce soccer balls (SB) and footballs (FB). The unit labor requirements for soccer balls and footballs in the US and Mexico are: a N SB = 10; a N FB = 2; a S SB = 10; a S FB = 10 • Which country has the absolute advantage in producing football? Which country has the comparative advantage in producing football? • Us the law of Comparative Advantage to predict...
England and Scotland both produce scones and sweaters. Suppose that an English worker can produce at...
England and Scotland both produce scones and sweaters. Suppose that an English worker can produce at most 40 scones per day or at most 2 sweaters per day. Suppose that a Scottish worker can produce at most 20 scones per day or at most 4 sweaters per day. a. Which country has the absolute advantage in the production of each good? b. Find the opportunity cost of producing one sweater in terms of scones for each country. In other words,...
The tables below illustrate production possibilities for Japan and the US in the production of electronic...
The tables below illustrate production possibilities for Japan and the US in the production of electronic equipment EE) and autos (AU). The following questions are based on these tables and pertain to Absolute and Comparative Advantage. Assume each country has the same amount of inputs and allocated 50% of its inputs to electronic equipment and 50% to autos. US is producing at “C” (48, 18) and Japan at “T” (66, 38) [middle columns]. Answer the following questions regarding Absolute and...
3. Assume that two countries, Home and Foreign, produce two goods: TVs and cars. Use the...
3. Assume that two countries, Home and Foreign, produce two goods: TVs and cars. Use the information below to answer the following questions: In the No-Trade equilibrium: Home Foreign TV sector Car sector TV sector Car sector Wage = 12 Wage = ? Wage* = ? Wage* = 6 MPL = 4 MPL = ? MPL* = ? MPL* = 1 Price = ? Price = 4 P* = 3 P* = ? (Hint: remember the link between price ratios...