Question

Assume the United States can use a given amount of its resources to produce either 20 airplanes or 8 automobiles and Japan can employ the same amount of its resources to produce either 20 airplanes or 10 automobiles. The United States should specialize in
a. airplanes
b. automobiles.
c. both good.
d. neither good.

Answer 1

Answer:

A. Airplanes

Explanation:

According to the comparative advantage theory, it is suggested that a country should focus on the production of goods and services for which it has the lowest opportunity cost. Having that in mind, in this case, Since both can produce 20 Airplanes but America can produce 8 automobiles and Japan can produce 10 automobiles, America should specialize in airplane production since Japan has lower opportunity in producing automobiles than America in producing airplanes. So according to comparative advantage, United states of America is expected to specialize in Airplane production and Japan in Automobiles production.

Answer 2

Answer:

a. Airplanes

Explanation:

If compared with Japan, the US will not produce as much Auto mobiles as Japan, and they won't make it in the business industry.

So it's advisable they compete with Japan since both two can produce same amount of airplanes (20)

US have little or nothing to loose if they do so.