Table 3-7 Assume That Japan and Korea Can Switch Between Producing Cars

question 73

Multiple Choice

Table 3-7
Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate.

-Refer to Table 3-7.Without trade,Japan produced and consumed 50 cars and 6 airplanes and Korea produced and consumed 27 cars and 7 airplanes.Then,each country agreed to specialize in the production of the good in which it has a comparative advantage and trade 28 cars for 8 airplanes.As a result,Japan gained

• A) 0 cars and 2 airplanes and Korea gained 1 car and 1 airplane.
• B) 2 cars and 2 airplanes and Korea gained 1 car and 1 airplane.
• C) 28 cars and 8 airplanes and Korea gained 28 cars and 8 airplanes.
• D) 52 cars and 8 airplanes and Korea gained 28 cars and 8 airplanes.

---

Definitions:

Consumer Surplus

The discrepancy between the price consumers are ready to offer for a good or service and the price they end up paying.

Marginal Benefit

The enhanced enjoyment or utility gained from the consumption of one extra unit of a good or service.

Total Revenue

The collective revenue a business accumulates from sales of products or provision of services within a set period.

Allocative Efficiency

A state of the economy in which resources are allocated in a way that maximizes the overall benefit to society, where the marginal costs of production are equal to the marginal benefits for all goods and services.