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.Korea should specialize in the production of
A) cars and import airplanes.
B) airplanes and import cars.
C) both goods and import neither good.
D) neither good and import both goods.

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.Korea should specialize in the production of
A) cars and import airplanes. 
B) airplanes and import cars. 
C) both goods and import neither good. 
D) neither good and import both goods.

Quizplus · Accepted Answer

According to the table, Korea has a comparative advantage in producing airplanes with an opportunity cost of 4 cars per airplane. Therefore, Korea should specialize in producing airplanes and import cars, which will benefit both Korea and Japan in terms of increased total output and trade.

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