Suppose the United States and Japan each produce only two goods and have the production possibilities shown in Figure 17.1.Without trade,Japan produces at point A and the United States produces at point B.Use the figure to answer the question(s)below.
-Which of the following best describes the comparative advantage of the two countries illustrated in Figure 17.1?

Question

Suppose the United States and Japan each produce only two goods and have the production possibilities shown in Figure 17.1.Without trade,Japan produces at point A and the United States produces at point B.Use the figure to answer the question(s)below. 
-Which of the following best describes the comparative advantage of the two countries illustrated in Figure 17.1?

Quizplus · Accepted Answer

Comparative advantage refers to the ability of a country to produce a particular good at a lower opportunity cost than another country. In Figure 17.1, Japan has a lower opportunity cost in producing motorcycles (it only has to give up 1 DVD player to produce 2 motorcycles) compared to the United States (it has to give up 2 DVD players to produce 1 motorcycle). On the other hand, the United States has a lower opportunity cost in producing DVD players (it only has to give up 1 motorcycle to produce 2 DVD players) compared to Japan (it has to give up 2 motorcycles to produce 1 DVD player). Therefore, Japan has a comparative advantage in motorcycles and the United States has a comparative advantage in DVD players.

Suppose the United States and Japan Each Produce Only Two