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3 years ago

Specialization in international trade- based on Ricardo’s Theory:

Business

1 answer:

m_a_m_a [10]3 years ago

4 0

Answer:

A) Japan specializes in Auto while US specializes in Planes

B) The range of terms of trade:

P = A . if P =A = 2A then the specialization will be beneficial to both countries.

C) The best terms of trade will be

P = ( A + 2A )/ 2 = 3A / 2 = 1.5A

D) The net benefit for each country (after specialization)

Japan : 20A-(7.5A+10A) = 2.5A

U.S : 40P- (13.33P + 20P) = 6.67P

E) some of The limitations of production and export :

i) There are more than two countries in the world hence the assumption are not real

ii) In the table the quality of goods produced is not tabulated/considered as well

iii) The technological expertise of both countries where not considered as well

Explanation:

A) From the information provided below ; Japan specializes in Auto while US specializes in Planes , this is because Japan is more efficient in the production of Autos when compared with Plane production.

B) The range of terms of trade:

lets assume that trade in Japan before specialization was : 12 A = 6 P, hence P = 2A also assume that of US to be ; P = A . if P =A = 2A then the specialization will be beneficial to both countries.

C) The best terms of trade will be

P = ( A + 2A )/ 2 = 3A / 2 = 1.5A

D) The net benefit for each country (after specialization)

Japan : 20A-(7.5A+10A) = 2.5A

U.S : 40P- (13.33P + 20P) = 6.67P

E) some of The limitations of production and export :

i) There are more than two countries in the world hence the assumption are not real

ii) In the table the quality of goods produced is not tabulated/considered as well

iii) The technological expertise of both countries where not considered as well

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