Table 3-5

-Refer to Table 3-5.If Japan and Canada open up trade based on the principle of comparative advantage,who loses in the short term in Japan?
A)consumers
B)workers in airplane-producing companies
C)workers in car-producing companies
D)owners of airplane-producing companies

Question

Table 3-5
 
-Refer to Table 3-5.If Japan and Canada open up trade based on the principle of comparative advantage,who loses in the short term in Japan?
A)consumers 
B)workers in airplane-producing companies 
C)workers in car-producing companies 
D)owners of airplane-producing companies

Quizplus · Accepted Answer

According to the data in Table 3-5, Japan has a comparative advantage in producing airplanes with a domestic opportunity cost of 100 cars per airplane, while Canada has a comparative advantage in producing cars with a domestic opportunity cost of 1/3 airplane per car. Therefore, if the two countries engage in trade, Japan would start importing cars from Canada and exporting airplanes to Canada. This would lead to a decrease in demand for domestically-produced cars in Japan, causing a short-term loss for workers in car-producing industries. However, consumers in Japan would benefit from having access to cheaper imported cars. The workers in airplane-producing companies and the owners of these companies would likely benefit from increased export opportunities.

Table 3-5 -Refer to Table 3-5.If Japan and Canada Open Up Trade