Premium Essay

Economy

In: Business and Management

Submitted By asadaj
Words 1146
Pages 5
Worked by ; Abdyl Sadaj
Professor A. Sejdini
Economy (BINF)
02/11/2015

2. American and Japanese workers can each produce
4 cars a year. An American worker can produce 10 tons of grain a year, whereas a Japanese worker can produce 5 tons of grain a year. To keep things simple, assume that each country has 100 million workers. 
 a) For this situation, construct a table analogous to the table in Figure 1. 
 | Car produced per year by a worker | Tons of grain produced per year by a worker | Amount produced by 100 milion workers | car | Tons of grain | | USA | 4 | 10 | 400 milon | 1 miliard | JAPAN | 4 | 5 | 400 milion | 500 milion |

b) Graph the production possibilities frontiers for the American and Japanese economies. USA Production Possibilities Frontier JAPAN Production Possibilities Frontier

c) For the United States, what is the opportunity cost of a car? Of grain? For Japan, what is the opportunity cost of a car? Of grain? Put this information in a table analogous to Table 1. | Opportunity Cost of: | | 1 car | 1 tons of grain | USA | 5/2 tons of grain | 2/5 cars | JAPAN | 5/4 tons of grain | 4/5 cars | d) Which country has an absolute advantage in producing cars? In producing grain? 
 In producing cars both countries have absolute advantage because each worker in these countries produces 4 cars/year. But in producing grain USA has an absolute advantage because in 1 year a worker produces 10 tons of grain instead of the JAPAN worker who produces 5 tons of grain. e) Which country has a comparative advantage in producing cars? In producing grain? 

USA has a lower opportunity cost of producing grain than JAPAN: A ton of grain costs USA only 2/5 cars, but it costs JAPAN...

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