Question

Suppose the U.S. and Japan both produce airplanes and televisions and the U.S. has a comparative advantage in the production of airplanes while Japan has a comparative advantage in the production of televisions. If the U.S. exports airplanes to Japan and imports televisions from Japan, __________.

Answer 1

The correct answer is: both countries, as a whole, will be better off.

Step-by-step explanation:

The comparative advantage model is one of the basic concepts that underlies the theory of international trade and demonstrates that countries tend to specialize in the production and export of those goods they manufacture with a relatively lower cost compared to the rest of the world, in those that are comparatively more efficient than the others and that will tend to import goods in those that are more inefficient and that therefore produce with comparatively higher costs than the rest of the world.