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Canadian and Japanese workers can each produce 4 cars per year. A Canadian worker can produce...

  1. 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.
    1. Graph the production possibilities frontier of the Canadian and Japanese economies.
    2. For Canada, what is the opportunity cost of a car? Of grain? For Japan, what is the opportunity cost of a car? Of grain?
    3. Which country has an absolute advantage in producing cars? In producing grain?
    4. Which country has a comparative advantage in producing cars? In producing grain? (Ignore the circle)
    5. Without trade, half of each country’s workers produce cars and half produce grain. What quantities of cars and grain does each country produce?
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