In one hour, the United States can produce 25 tons of steel or 250 automobiles. In one hour,Japan can produce 30 tons of steel or 275 automobiles. This information implies that:

A.Japan has a comparative advantage in the production of automobiles.
B.the United States has an absolute advantage in the production of steel.
C.Japan has a comparative advantage in the production of both goods.
D.the United States has a comparative advantage in the production of automobiles.

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Dryomys Dryomys · Answer 1 · 2020-01-24T11:30:37+01:00

Answer:

Option (D) is correct.

Explanation:

In United states:

Can produce 25 tons of steel or 250 automobiles,

Opportunity cost of producing a ton of steel = 250 ÷ 25

= 10 automobiles

Opportunity cost of producing 1 automobile = 25 ÷ 250

= 0.1 tons of steel

In Japan:

Can produce 30 tons of steel or 275 automobiles,

Opportunity cost of producing a ton of steel = 275 ÷ 30

= 9.17 automobiles

Opportunity cost of producing 1 automobile = 30 ÷ 275

= 0.11

Therefore,

United States has a comparative advantage in producing automobiles because the opportunity cost of producing automobiles is lower than the Japan.

Japan has a comparative advantage in producing steel because the opportunity cost of producing steel is lower than the United states.