The following table indicates the production possibilities of food and clothing per worker day in the United States and Japan.

Which of the following is true?
A)Since U.S.workers produce more of both food and clothing than Japanese workers,no gains from trade are possible.
B)Mutual gains from trade could be realized if the United States specialized in food production and Japan in clothing production.
C)The Japanese are the low-cost producers of both food and clothing.
D)Joint output would be maximized if the United States specialized in producing clothing and Japan in producing food.

Question

The following table indicates the production possibilities of food and clothing per worker day in the United States and Japan.

Which of the following is true?
A)Since U.S.workers produce more of both food and clothing than Japanese workers,no gains from trade are possible. 
B)Mutual gains from trade could be realized if the United States specialized in food production and Japan in clothing production. 
C)The Japanese are the low-cost producers of both food and clothing. 
D)Joint output would be maximized if the United States specialized in producing clothing and Japan in producing food.

Quizplus · Accepted Answer

The table shows that the United States has a comparative advantage in producing clothing whereas Japan has a comparative advantage in producing food. This means that both countries can benefit by specializing in the production of the good in which they have the lower opportunity cost and then trading with each other. By doing so, both countries can consume more of both goods than they would be able to produce on their own. Therefore, mutual gains from trade could be realized if the United States specialized in clothing production and Japan specialized in food production.

The Following Table Indicates the Production Possibilities of Food and Clothing