Question

In: Economics

In a two-country, two-product world, the statement "Japan enjoys a comparative advantage over France in autos...

In a two-country, two-product world, the statement "Japan enjoys a comparative advantage over France in autos relative to ships" is equivalent to

A) France having a comparative advantage over Japan in ships.

B) France having a comparative disadvantage compared to Japan in autos and ships.

C) Japan having a comparative advantage over France in autos and ships.

D) France having no comparative advantage over Japan.

E) France should produce autos.

Solutions

Expert Solution

When one country has a comparative advantage over other country in a particular product, it enjoys a lower opportunity cost of production for that good.

So, when it is said Japan has a comparative advantage in Autos, this means Japan has a lower opportunity cost in the production of Autos as compared to France.

Thus France will have a comparative advantage over Japan in the production of Ships because it would lower opportunity cost in the production of ships and thus France should produce Ships.

So answer is a) France having a comparative advantage over Japan in ships.

Rahul Sunny answered 3 years ago
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