Ireland and Japan are assumed to produce only wool and steel,to have full employment and complete mobility of resources between industries.Their production possibilities boundaries before trade are drawn in solid lines.It is assumed that the two countries have the same amount of resources.Their consumption possibilities after trade are shown by the dotted lines.The outputs of wool and steel are given in physical units. FIGURE 32-1 Refer to Figure 32-1.The comparative advantage is held by

Question

Ireland and Japan are assumed to produce only wool and steel,to have full employment and complete mobility of resources between industries.Their production possibilities boundaries before trade are drawn in solid lines.It is assumed that the two countries have the same amount of resources.Their consumption possibilities after trade are shown by the dotted lines.The outputs of wool and steel are given in physical units.  FIGURE 32-1 Refer to Figure 32-1.The comparative advantage is held by

Quizplus · Accepted Answer

Ireland has a lower opportunity cost of producing wool (1 steel = 2 wool) compared to Japan (1 steel = 3 wool). Japan has a lower opportunity cost of producing steel (1 wool = 1/3 steel) compared to Ireland (1 wool = 1/2 steel). Therefore, Ireland has a comparative advantage in producing wool and Japan has a comparative advantage in producing steel. With trade, Ireland will specialize in producing wool and trade some of it for steel from Japan, while Japan will specialize in producing steel and trade some of it for wool from Ireland. This will lead to both countries consuming at points outside their production possibilities frontiers, resulting in an increase in their overall welfare.

Ireland and Japan Are Assumed to Produce Only Wool and Steel,to