The United States Can Produce 30 Computers for Every Car

question 207

Essay

The United States can produce 30 computers for every car it produces, and Japan can produce 15 computers for every car it produces.Based on this information, which of the following statements is incorrect?
A.The United States should specialize in computer production.
B.Japan has the comparative advantage in car production.
C.There will be gains from trade if the United States exports computers to Japan.
D.Japan has an absolute advantage in car production.

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Definitions:

Market Setting

The environmental and regulatory conditions in which buying and selling occur.

Invisible Hand

A term coined by Adam Smith to describe the self-regulating behavior of the marketplace.

Market Prices

The current value at which goods or services can be bought or sold in an open market.

Market Prices

The current price at which an asset or service can be bought or sold, determined by supply and demand in an open market.