Assume that maximum feasible hourly productions levels if all resources are utilized in the United States are either 3 yards of fabric or 9 bushels of wheat. Maximum feasible production levels if all resources are utilized in Japan are either 6 yards of fabric or 12 bushels of wheat. Based on this information
A) beneficial trade is absolutely impossible between the two countries.
B) the United States will benefit from trading but Japan will not.
C) both nations will gain from specialization and trade, with the United States exporting wheat and Japan exporting fabric.
D) Japan should specialize in both products.

Question

Quizplus · Accepted Answer

Both nations have a comparative advantage in producing one of the two goods. The United States has a comparative advantage in producing wheat, while Japan has a comparative advantage in fabric production. Therefore, if the two countries specialize in producing the goods at which they have a comparative advantage, and then trade with each other, both countries can benefit from the exchange. The US can export wheat to Japan, and Japan can export fabric to the US. This will enable both countries to consume a greater quantity of goods than would be possible if they had attempted to produce both goods on their own.

Assume That Maximum Feasible Hourly Productions Levels If All Resources