Question

Hours needed to make 1 Quantity produced in 2400 hours

Car Airplane Car Airplane
Japan 30 150 80 16
Korea 50 150 48 16

Without trade, Japan produced and consumed 50 cars and 6 airplanes and Korea produced and consumed 27 cars and 7 airplanes. Then, each country agreed to specialize in the production of the good in which it has a comparative advantage and trade 28 cars for 8 airplanes. As a result, Japan gained.

a. 0 cars and 2 airplanes and Korea gained 1 car and 1 airplane.
b. 2 cars and 2 airplanes and Korea gained 1 car and 1 airplane.
c. 28 cars and 8 airplanes and Korea gained 28 cars and 8 airplanes.
d. 52 cars and 8 airplanes and Korea gained 28 cars and 8 airplanes.

Answer 1

b. 2 cars and 2 airplanes and Korea gained 1 car and 1 airplane.

Step-by-step explanation:

hours needed units produced in 2,400 hours

Car Airplane Car Airplane

Japan 30 150 80 16

Korea 50 150 48 16

without trade, Japan consumes 50 cars and 6 airplanes

without trade, Korea consumes 27 cars and 7 airplanes

Japan's opportunity cost to produce 1 plane = 150 / 30 = 5 cars

Japan's opportunity cost to produce 1 car = 30 / 150 = 0.2 planes

Korea's opportunity cost to produce 1 plane = 150 / 50 = 3 cars

Korea's opportunity cost to produce 1 car = 50 / 150 = 0.33 planes

Japan will produce 80 cars and Korea 16 airplanes

after trade

Japan will receive 8 airplanes in exchange for 28 cars:

it will have 8 airplanes and 52 cars

Korean will receive 28 cars in exchange for 8 airplanes:

it will have 8 airplanes and 28 cars