Question

Use the following information to explain the benefits of specialization and trade.

FIGURE VII (WORLD)

Production possibility	Steel per period	Robots per period
A	600	0
B	400	400
C	0	600

Using the data presented above for the USA and Japan, determine which country should specialize in steel production and which should specialize in robot production. What is the basis of your determination?

Answer 1

Production possibility	Steel per period	Robots per period
A	600	0
B	400	400
C	0	600

The following figure shows the production possibilities of the two countries:-

By watching the figure we can state that The USA is appropriate for the steel manufacturing and Japan is appropriate for the Robot manufacturing. The other factor is USA has larger amount of Resources for Steel manufacturing and on the other hand Japan is having better technological advancing.

In possibility A: - We can see if USA uses its full efficiency and resources in producing Steel it can produce maximum output of steel.

In possibility B: - We can see USA and Japan couldn’t utilize their resources effectively and efficiently and the production is less.

In possibility C: - We can see if Japan uses its full efficiency and resources in producing Robot it can produce maximum output of Robot.

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