Amount of Beef or Computers Produced by One Worker in a Day Canada Japan Beef 6

Question

Amount of Beef or Computers Produced by One Worker in a Day
               Canada Japan
    Beef         6    5
Computers    2        4

2. Which country has the absolute advantage in beef
production?
3. Which country has the absolute advantage in computer
production?
4. Which country has the comparative advantage in beef
production?
5. Which country has the comparative advantage in
computer production?
6. What are the limits of the terms of trade? Specifically,
when is Canada willing to trade with Japan, and when
is Japan willing to trade with Canada?

Explanation / Answer

2. Canada has the absolute advantage in beef 3. Japan has the absolute advantage in computers 4. Canada has the comparative advantage in beef production, giving up 1/3 of a computer for every unit of beef versus Japan which gives up 4/5 of a computer for a unit of beef 5. Japan has the comparative advantage in computer production, giving up only 1.25 units of beef for every computer, versus canada which must give up 3 units of beef to produce a computer. 6. Canada is willing to trade beef to japan for computers at a rate of no more than 3 units of beef for every computer and Japan is willing to trade computers to Canada at a rate of no more than 1.25 computers for every unit of beef.

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