Suppose that the U.S. can produce either 10 tons of corn or 10 tons of steel using 1 resource unit, and Japan can produce either 2 tons of corn or 10 tons of steel using 1 resource unit. If the U.S. and Japan each allocate 2 resource units to producing their comparative, what is the total output of corn (U.S. corn + Japanese corn) and steel (U.S. steel + Japanese steel)?

Question

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The U.S. has a comparative advantage in producing corn because it can produce the same amount of corn as steel with one resource unit, whereas Japan can produce five times as much steel as corn with one resource unit. Therefore, the U.S. should specialize in corn production and Japan in steel production. With 2 resource units, the U.S. produces 20 tons of corn (10 tons per unit * 2 units) and Japan produces 20 tons of steel (10 tons per unit * 2 units), making the total output 20 tons of corn and 20 tons of steel.

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