Question

Why should the U.S. and Japan trade products A and B, even if they can both produce the products individually?

Answer 1

Even if both countries have the resources to manufacture products A and B, international trade between these nations is still significant. Producers try to expand their market in various nations to gain more profit. Also, it gives consumers to choose a variety of these products. What's more, it fuels economic development, production efficiency, and less global conflict for both countries.

Answer 2

The correct answer is the U.S. has a comparative advantage in producing Product B and Japan in Product A, which means overall trade increases.

The U.S. and Japan trade products A and B, even if they can both produce the products individually because the U.S. has a comparative advantage in producing Product B and Japan in Product A, which means overall trade increases.

The specialization of manufacture in each product allows both countries trade increases because the United States has comparative advantages in product A and Japan has comparative advantages in product B. Although the product is the same, there is always some differences as tiny as they could see, and it is good to have a comparative advantage that results in consumer options for their markets. These increase the production, the supply and the variety of products, augmenting the utilities for Japan and the U.S.