In a Two-Country World of Japan and South Korea, Suppose

question 60

Essay

In a two-country world of Japan and South Korea, suppose Japan can produce 600 radios or 300 TV sets in one day with all its available resources, while South Korea can produce 100 radios or 200 TV sets in one day with all its available resources. According to the theory of comparative advantage, what would be the possible gain in this world if the two countries specialize and trade with each other?

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Definitions:

Maker

The person or entity that creates or produces something, often referred to in contexts such as art, manufacturing, or finance.

Notes

Short-term financial instruments, typically in the form of a debt or loan, that require repayment of the principal and interest by the issuer.

Drafts

Preliminary versions of documents, or negotiable instruments drawn by one party (drawer) ordering another party (drawee) to pay a specified sum to a third party.

Indorsed in Blank

A signature on a negotiable instrument like a check, making it payable to whoever holds the instrument, without naming a specific endorsee.