If Japanese Workers Receive Lower Wages in the Production of Autos

question 5

Multiple Choice

If Japanese workers receive lower wages in the production of autos than do American workers:

• A) Japan will have a comparative advantage in the production of autos
• B) Japan will have an absolute advantage in the production of autos
• C) Production costs will be lower in Japan than in the U.S.
• D) Production costs could be lower in the U.S.if American labor productivity is higher than the Japanese

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Definitions:

Industry Demand

The total demand for all the goods or services produced by a particular market sector.

Perfectly Elastic

Describes a situation where the quantity demanded or supplied responds infinitely or by unlimited quantity to any change in price, represented graphically as a horizontal line.

Quantity Demanded

The amount (number of units) of a product that a household would buy in a given period if it could buy all it wanted at the current market price.

Breaks Even

Achieves a situation where there is no profit or loss, synonymous with the concept of the break-even point but phrased differently.