Assume Australia can use a given amount of its resources to produce either 20 caravans or 8 automobiles and Japan can employ the same amount of its resources to produce either 20 caravans or 10 automobiles.Australia should specialise in:

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Quizplus · Accepted Answer

Australia has a comparative advantage in producing caravans as it can produce 20 caravans with the same resources that can only produce 8 automobiles. In contrast, Japan can produce either 20 caravans or 10 automobiles with the same resources. This implies that Japan has a comparative advantage in producing automobiles. Therefore, it would be best for Australia to specialize in producing caravans and trade with Japan for automobiles, which would be mutually beneficial.

Assume Australia Can Use a Given Amount of Its Resources