Author Question: If a comparative advantage implies that a country can produce a product at a lower opportunity cost ... (Read 102 times)

SO00 · **on:** Jun 29, 2018

If a comparative advantage implies that a country can produce a product at a lower opportunity cost than another country then why do we see two countries often trading the same goods? For instance, for most agricultural products the U.S.

has a comparative advantage. Japan, one of America's largest trading partners has a comparative advantage in the production of most economy cars. Explain what is going on here when we still see the U.S. exporting cars to Japan and the U.S. importing some foods from Japan.

Question 2

Refer to Table 4-2. The table above lists the highest prices five consumers are willing to pay for a concert ticket. If the price of one ticket falls from 50 to 20

A) everyone will buy a ticket. B) consumer surplus decreases from 48 to 24.
C) only three tickets will be sold. D) consumer surplus increases from 0 to 62.

shailee · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

First of all not all goods are homogeneous. The U.S. may import some food from Japan that either is not available here or is produced at lower cost or has a higher perceived or actual quality differential. On the other hand while Japan has a comparative advantage in the production of many economy cars there is a cost difference and a quality difference across makes a models that doesn't allow for a apples-to-apples comparison.

Answer to Question 2

D