Suppose Japan can produce 2 million trucks per day or it cou

Suppose Japan can produce 2 million trucks per day, or it could produce up to 3 million cars. ON the other hand, Germany can produce 4 million trucks per day, or it could produce up to 5 million cars. What is an example of a trade that could take place between these two countries? and why?

Solution

The example of a trade that could take place between these countries include exporting & importing. Germany has a comparative advantage over Japan in the production of trucks and cars as it can produce more cars or trucks per day than Japan. Therefore Germany can export cars or trucks to Japan and since Japan produces lesser cars or trucks when compared to Germany , Japan should import cars and trucks from Germany .