Table 3-5

-Refer to Table 3-5.If Japan and the United States trade based on the principle of comparative advantage,
A)both countries can consume outside of their respective production possibilities frontiers.
B)both countries can have more airplanes and cars than they would have without trade.
C)Japan will specialize in cars and the United States will specialize in airplanes.
D)All of the above are correct.

Question

Table 3-5
 
-Refer to Table 3-5.If Japan and the United States trade based on the principle of comparative advantage,
A)both countries can consume outside of their respective production possibilities frontiers. 
B)both countries can have more airplanes and cars than they would have without trade. 
C)Japan will specialize in cars and the United States will specialize in airplanes. 
D)All of the above are correct.

Quizplus · Accepted Answer

The principle of comparative advantage states that each country should specialize in producing the good in which it has a lower opportunity cost and trade with other countries. This allows both countries to consume outside of their respective production possibilities frontiers and have more airplanes and cars than they would have without trade. Japan will specialize in cars and the United States will specialize in airplanes. Therefore, all of the above are correct.

Table 3-5 -Refer to Table 3-5.If Japan and the United States Trade