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Graph the following example and answer the questions: The United States and Japan only produce two goods.  They have the same fixed resources and they are equally efficient, and both countries have constant opportunity costs between the two goods.  In one month, the United States can make 200,000 units of fiber optic cable or 600,000 flash drives.  Japan can produce 300,000 units of fiber optic cable or 600,000 flash drives. 

  • Who has the Absolute Advantage in the production of Flash Drives?
  • Who has the Absolute Advantage in the production of Fiber Optic Cable?
  • What is the opportunity cost for the USA for Flash Drives?
  • What is the opportunity cost for the USA for Fiber Optic Cable?
  • What is the opportunity cost for Japan for Flash Drives?
  • What is the opportunity cost for Japan for Fiber Optic Cable?

 

**If both countries devote 50% of their resources to the production of both goods...

  • ...what would the USA's production of Flash Drives be?
  • ...what would the USA's production of Fiber Optic Cable be?
  • ...what would Japan's production of Flash Drives be?
  • ...what would Japan's production of Fiber Optic Cable be?
  • ...what would the combined production of Flash Drives be?
  • ...what would the combined production of Fiber Optic Cable be?

 

**If the two nations each specialize where they have a comparative advantage...

  • ...what would the USA's produce, and how much?
  • ...what would Japan's produce and how much?
  • ...what would the combined production of Flash Drives be?
  • ...what would the combined production of Fiber Optic Cable be?

 

**Compared to when each nation was producing both goods...

  • ...what would the combined production of Flash Drives be?
  • ...what would the combined production of Fiber Optic Cable be?
  • Would these nations enter a trade agreement?
  • Why or why not?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M9526657

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