17) Which country has the absolute advantage in producing computers? Which count

Question

17) Which country has the absolute advantage in producing computers? Which country has the absolute advantage in producing cars? a) Japan has the absolute advantage in producing both computers and cars. b) Japan has the absolute advantage in producing computers. China has the absolute advantage in producing cars. c) China has the absolute advantage in producing computers. Japan has the absolute advantage in producing cars. d) China has the absolute advantage in producing both computers and cars.

Explanation / Answer

Answer

The correct answer is (c) China has absolute advantage in roducing computers and Japan has absolute advantage in producing cars

Frst Lets calculate equation of PPF of China

China can produce either 2000 computers and 50 cars or can Produce 2800 computers and 0 cars and PPF is a stratight Line. Now Let C represents Computers and D represents cars. Hence we have 2 coodinates of (C,D) and they are (2000,50) and (2800,0)Hence Equation of PPF is given by:

D - 0 = ((50-0)/(2000-2800))*(C - 2800)

=> D = -(50/800)(C - 2800)

=> 800D = 140000 - 50C

=> 5C + 80D = 14000.

=> C + 16D = 2800

Hence If C = 0 then D = 175 and If D = 0, C = 2800. Hence If China uses his resources then China can produce either 175 cars or he can Produce 2800 computers.

Now,

Lets calculate equation of PPF of Japan

Japan can produce either 1000 computers and 75 cars or can Produce 1600 computers and 0 cars and PPF is a stratight Line. Now Let C represents Computers and D represents cars. Hence we have 2 coodinates of (C,D) and they are (1000,75) and (1600,0)Hence Equation of PPF of China is given by:

D - 0 = ((75-0)/(1000-1600))*(C - 1600)

=> D = -(75/600)(C - 1600)

=> 600D = 120000 - 75C

=> C + 8D = 1600.

Hence If C = 0 then D = 200 and If D = 0, C = 1600. Hence If he uses his resources then Japan can produce either produce 200 cars or he can Produce 1600 computers.

Hence If China and Japan both uses all there resources on making cars. Then China can produce 175 Cars and Japan can produce 200 cars. Hence Japan can produce more cars . Hence Japan has absolute advantage in Producing Cars.

If China and Japan both uses all there resources on making computers. Then China can produce 2800 Computers and Japan can produce 1600 computers. Hence China can produce more computers . Hence China has absolute advantage in Producing Computers.

China has absolute advantage in producing computers and Japan has absolute advantage in producing cars.

Hence, the correct answer is (c) China has absolute advantage in roducing computers and Japan has absolute advantage in producing cars

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.