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

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Quizplus · Accepted Answer

Australia has a comparative advantage in producing airplanes since it can produce 20 airplanes with the same amount of resources that can produce only 8 automobiles. On the other hand, Japan can produce either 20 airplanes or 10 automobiles, which shows that it has a comparative advantage in producing airplanes as well as automobiles. Therefore, Australia should specialize in airplanes and trade with Japan, which can specialize in automobiles. This way, both countries can benefit from each other's comparative advantage and increase their overall output and welfare.

Assume Australia Can Use a Given Amount of Its Resources