Suppose there are two countries: Japan and the United States, producing two goods, x- ray machines...

Suppose there are two countries: Japan and the United States, producing two goods, x- ray machines (x) and yucca plants (y). The following table shows the amount of labor inputs needed to make one unit of output of each of the two commodities in each of the two countries. Suppose Japan has 48 million workers and the United States has 24 million workers.

	x-ray	yucca
Japan	12	6
US	2	8

a.) (6 points) Graph the production possibility frontier (PPF) for each country. Which country has the comparative advantage in producing x-ray machines?

Solutions

Expert Solution

Answer to the following question:

Japan has 48 m worker and the US has 24 m worker. So, given this information, the maximum of X-ray machine and yucca that the US and Japan can produce is given below.

1 unit of yucca requires 6 labour force in Japan. So, Using 48 m of labour force the Japan can produce maximum of (48/6)=8 million yucca plants.

And 1 unit of yucca requires 8 labour force in UC. Using 24 m of labour force the US can produce maximum of (24/8)=3 million yucca plants.

1 unit of X-ray machine production requires 12 labour force in Japan. So, Using 48 m of labour force the Japan can produce maximum of (48/12)=4 million X-ray machines.

1 unit of X-ray machine production requires 2 labour force in US. So, Using 24 m of labour force the US can produce maximum of (24/2)=12 million X-ray machines.

In the following image the PPF of Japan is shown:

In the following image the PPF of US is shown:

Seeing these two PPF we can conslude that the US has an absolute as well as the comparative advantage in the production and export of the X-ray machines. Whereas the Japan has an absolute as well as the comparative advantage in the production and export of the Yucca plants. Since Japan can produce more of yucca plants using less of labour force than that of the US. And US can produce more of X-ray machines using less of labour force than that of the Japan.

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Rahul Sunny answered 1 year ago

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