Suppose the United States and Japan produce only cell phones and digital music p

Question

Suppose the United States and Japan produce only cell phones and digital music players, like Apple's iPod. Assume that each country uses only labor to produce each good, and that Japanese and U.S. cell phones and digital music players are exactly the same. Determine the missing opportunity costs in the table below and fill in the missing values. (Enter your responses rounded to one decimal place.) From the tables above it is clear that has an absolute advantage in the production of both goods and that has a comparative advantage in cell phones, while has a comparative advantage in digital music players. A. the United States, Japan,Japan B. Japan,Japan,the United States C. Japan,the United States,Japan D. the United States,the United States,Japan

Explanation / Answer

B is correct

As japan has both higher production, so obviusly absolute advantage benefical

NowOpporunity cost of cell phone is lower for Japan and and opporunity cost for music is lower for US, so Japan should have comparative advantage in Cell and US in Music.

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