Suppose that for each automobile Japan produces it must forego producing 40 computers.The United States must forego producing 80 computers for each automobile it produces.Which of the following is true?
A)Japan has a comparative advantage in producing computers.
B)the U.S.has a comparative advantage in producing computers.
C)the U.S.has a comparative advantage in producing automobiles.
D)the U.S.has an absolute advantage in producing automobiles.
E)the opportunity cost of producing computers is the same for Japan and the U.S.

Question

Quizplus · Accepted Answer

The opportunity cost of producing an automobile in Japan is 40 computers, while in the United States it is 80 computers. This means that the U.S. has a higher opportunity cost of producing automobiles and a comparative advantage in producing computers. Therefore, choice B is correct. Choice A is incorrect because Japan has a higher opportunity cost of producing automobiles, not a comparative advantage in producing computers. Choice C is incorrect because the U.S. has a higher opportunity cost of producing computers, not a comparative advantage in producing automobiles. Choice D is incorrect because we don't have enough information to determine which country has an absolute advantage in producing automobiles. Finally, choice E is incorrect because the opportunity cost is not the same for both countries.

Suppose That for Each Automobile Japan Produces It Must Forego