Ireland and Japan are assumed to produce only wool and steel, to have full employment and complete mobility of resources. 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 line. The outputs of wool and steel are given in physical units. FIGURE 33- 1
-Refer to Figure 33- 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. 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 line. The outputs of wool and steel are given in physical units.  FIGURE 33- 1
-Refer to Figure 33- 1. The comparative advantage is held by

Quizplus · Accepted Answer

Before trade, Ireland can produce 8 units of wool or 4 units of steel, while Japan can produce 8 units of wool or 16 units of steel. Thus, Japan has a comparative advantage in producing steel, while Ireland has a comparative advantage in producing wool. After trade, they can specialize in their respective areas of comparative advantage and trade. Ireland can export wool to Japan and import steel in return, while Japan can export steel to Ireland and import wool in return. This allows both countries to consume beyond their production possibilities boundaries, as shown by the consumption possibilities after trade (dotted line). Therefore, the best answer is E, with Ireland having a comparative advantage in wool and Japan having a comparative advantage in steel.

Ireland and Japan Are Assumed to Produce Only Wool and Steel