Problem: Suppose the US and Japan have the following production possibility tables (final output combinations):
|
Japan
|
United States
|
|
Bolts of Cloth
|
Tons of Wheat
|
Bolts of Cloth
|
Tons of Wheat
|
|
1000
|
0
|
500
|
0
|
|
800
|
100
|
400
|
200
|
|
600
|
200
|
300
|
400
|
|
400
|
300
|
200
|
600
|
|
200
|
400
|
100
|
800
|
|
0
|
500
|
0
|
1000
|
|
1000
|
0
|
500
|
0
|
a. Draw each country's production possibility curve.
b. In what good does the United States have a comparative advantage? What about Japan?
c. Is there a possible trade that benefits both countries? If there are several such possible situations, please discuss ONLY one.
d. Please demonstrate your answer to point c above graphically (be sure to properly label your graph).