Assume the US can use a given amount of its resources to produce either 18 plane

Question

Assume the US can use a given amount of its resources to produce either 18 planes (A) or 8 tanks (T) and Japan can employ the same amount of its resources to produce either 20 airplanes or 10 tanks. From the perspective of the comparative advantage...

a. US should specialize in producing airplanes even if the US has absolute disadvantage in producing airplanes
b. Japan should specialize in producing both goods because Japan is more efficient in producing both goods
c. The PPC for Japan cannot be A+2T = 30
d. A and B
e. A and C

Explanation / Answer

E Since we have a comparative advantage in airplanes we should produce them. Japan's PPC is A+2T =20, not 30.

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