Question 1
According to the theory of comparative advantage, a country
◦ exports the goods in which its has a comparative advantage.
◦ imposes tariffs on goods in which it does not have comparative advantage.
◦ imports the goods in which it has a comparative advantage.
◦ exports goods in which it has absolute advantage.
Question 2
China has a comparative advantage in textiles and an absolute advantage in both textiles and radios. Japan has a comparative advantage in radios. According to this scenario
◦ Japan should import both radios and textiles.
◦ China should export both radios and textiles.
◦ China should export textiles and import radios.
◦ Japan should export textiles and import radios.
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