Question

Assume that an American worker can produce 5 cars per year or 10 tons of grain per year, whereas a Japanese worker can produce 15 cars per year or 5 tons of grain per year. Assume that labor is the only input used in car and grain production. Which country has the absolute advantage in producing cars? In producing grain? For the United States, what is the opportunity cost of producing a car? What is the opportunity cost of producing a ton of grain? Show how you arrived at your numbers. For Japan, what is the opportunity cost of producing a car? What is the opportunity cost of producing a ton of grain? Show how you arrived at your numbers. If free trade is allowed, which country will import cars? Which country will import grain? Explain.

          Assume that an American worker can produce 5 cars per year or 10 tons of grain per year, whereas a Japanese worker can produce 15 cars per year or 5 tons of grain per year. Assume that labor is the only input used in car and grain production.
Which country has the absolute advantage in producing cars? In producing grain?
For the United States, what is the opportunity cost of producing a car? What is the opportunity cost of producing a ton of grain? Show how you arrived at your numbers.
For Japan, what is the opportunity cost of producing a car? What is the opportunity cost of producing a ton of grain? Show how you arrived at your numbers.
If free trade is allowed, which country will import cars? Which country will import grain? Explain.

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Added by Nerea M.

Principles of Economics

Gregory Mankiw 8th Edition

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Solved by Expert Anjali Kurse

04/23/2022

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Step 1: Determine absolute advantage in producing cars and grain** - American worker: 5 cars per year or 10 tons of grain per year - Japanese worker: 15 cars per year or 5 tons of grain per year Absolute advantage in producing cars: Japan Absolute advantage in Show more…

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Assume that an American worker can produce 5 cars per year or 10 tons of grain per year, whereas a Japanese worker can produce 15 cars per year or 5 tons of grain per year. Assume that labor is the only input used in car and grain production. Which country has the absolute advantage in producing cars? In producing grain? For the United States, what is the opportunity cost of producing a car? What is the opportunity cost of producing a ton of grain? Show how you arrived at your numbers. For Japan, what is the opportunity cost of producing a car? What is the opportunity cost of producing a ton of grain? Show how you arrived at your numbers. If free trade is allowed, which country will import cars? Which country will import grain? Explain.

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Transcript

00:01 All right, so in this question, we're talking about different opportunity costs, basically.

00:05 So, we know that american workers can produce five cars per year or 10 tons of grain.

00:18 We know that japanese workers can produce 15 cars per year or five tons of grain.

00:35 I'm sorry, this should be on the outside here.

00:41 All right.

00:41 So now, which has the absolute advantage in producing both? so absolute advantage is just the ability to produce more than your competitor.

00:54 That's all.

00:55 So when it comes to cars, the japanese have the absolute advantage.

01:01 When it comes to grain, the u .s.

01:05 Has absolute advantage.

01:08 All right.

01:09 So now what's the opportunity cost of producing a car for the u .s.? so for the u .s., to produce a car, you need to give up a certain amount of grain, basically.

01:26 10 tons grain.

01:30 So basically all i'm doing here by dividing these is divide this by five to get one car per year.

01:38 The ratio of that is two tons of grain.

01:45 So basically all that's telling us is that to produce one car, it requires two tons of grain.

01:51 Now for producing a ton of grain, it's going to be the opposite.

01:58 10 tons of grain or five cars.

02:04 You divide that by 10, you get one ton grain is 0 .5 cars.

02:12 So now we'll do the same thing for the japanese.

02:18 So 15 cars or 5 tons of grain.

02:25 Now we divide this one way, divide by 15 to get the price of making one car, right? so 5 divided by 15 is your 0 .33 tons grain...

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