Assume that Japan and Korea can switch between producing car

Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate. Hours Needed Quantity to Make 1 Produced in 2400 Hours Car apan 30 150 Korea50 150 plane Cars 80 48 lanes 16 16 Refer to Table 3-7. Korea has an absolute advantage in the production of C a neither good and a comparative advantage in the production of cars of airplanes production of airplanes O b.cars and a comparative advantage in the production C c. neither good and a comparative advantage in the c d-cars and a comparative advantage in the production of cars

Solution

The correct answer is: c)

Reason: Japan can produce more cars and the same amount of airplane than Korea with the same number of hours. Thus, Korea don\'t have an absolute advantage in any of the good.

Also, the opportunity cost of producing an airplane in Japan is 5 units of car and that in Korea is 3 units of car. Thus, Korea has a comparative advantage in the production of airplanes.

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