Table 3-7
Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate.

-Refer to Table 3-7.Japan and Korea would not be able to gain from trade if Korea's opportunity cost of one car changed to
A) 1/5 airplane.
B) 1/3 airplane.
C) 3 airplanes.
D) 5 airplanes.

Question

Table 3-7
Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate.
 
-Refer to Table 3-7.Japan and Korea would not be able to gain from trade if Korea's opportunity cost of one car changed to
A) 1/5 airplane. 
B) 1/3 airplane. 
C) 3 airplanes. 
D) 5 airplanes.

Quizplus · Accepted Answer

Korea's opportunity cost of one car is currently 1/2 airplane. If it changed to 1/5 airplane, then Korea would have a comparative advantage in producing cars and Japan would have a comparative advantage in producing airplanes. This would allow both countries to gain from trade.

Table 3-7 Assume That Japan and Korea Can Switch Between Producing Cars