American and Japanese workers can each produce 4 cars a year. An
American worker can produce 10 tons of grain a year, whereas a
Japanese worker can produce 5 tons of grain a year. To keep things
simple, assume that each country has 100 million workers.
a) – For this situation, construct a table analogous
b) – Graph the production possibilities frontier of the American
and Japanese economies.
c) For the United States, what is the opportunity cost? Of grain?
For Japan, what is the opportunity cost of a car? Of grain?
d) Which country has an absolute advantage in producing cars? in
e) Which country has a comparative advantage in producing cars?
f) W/out trade, 1/2 of each country’s workers produce cars and half
produce grain. what quantities of cars and grain does each country
g) If there were no trade, what is an example in which trade makes
each country better off?