Question

2. Suppose the United States and Japan produce only cell phones and digital music players, like Apple's iPod. Assume that each country uses only labor to produce each good, and that Japanese and U.S. cell phones and digital music players are exactly the same Output per Hour of Work Cell Phones Digital Music Players Japan United States Determine the missing opportunity costs in the table below and fill in the missing values. (Enter your responses rounded to one decimal place.) Opportunity Costs Cell Phones Digital Music Players 2.0 Japan United States 20 From the tables above it is clear that has an absolute advantage in the production of both goods and that a comparative advantage in cell phones, while _ _has a comparative advantage in digital music players. has A. Japan Japan, the United States OB. the United States, the United States, Japan c. Japan, the United States, the United States OD. the United States, Japan, the United States

Answer 1

Ans. 2.

Japan

The opportunity cost of Digital Music players

2 Digital Music Players - 1 cell phone

Digital Music player - 1/2 cell phone

Digital Music player - 0.5 cell phone

United States

6 cell phones - 3 Digital Music Players

cell phone - 3/6 Digital Music Players

Cell Phone - 0.5 Digital Music Player

The opportunity cost

Country	Cell phones	Digital Music Players
Japan	2.0	0.5
United States	0.5	2.0

Ans. B) The united states, the united states, Japan

The united states has an absolute advantage in the production of both the goods ( i.e. Cell phones, Digital Music players ) because it produces more of both goods than Japan with the given working hours.

The united states has a comparative advantage in the production of cell phones because of the lower opportunity cost of cell phones.

Japan has a comparative advantage in the production of Digital Music players because of the lower opportunity cost of digital music players.