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

question 373

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.Assume that Japan and Korea each has 2400 hours available.Originally,each country divided its time equally between the production of cars and airplanes.Now,each country spends all its time producing the good in which it has a comparative advantage.As a result,the total output of cars increased by

• A) 16.
• B) 40.
• C) 64.
• D) 80.

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Definitions:

Pareto Optimal

A resource allocation condition wherein it is infeasible to make improvements for any individual or preference without imposing disadvantages on at least one other.

Utility Function

A mathematical representation that ranks various bundles of goods according to the levels of satisfaction they provide to the consumer.

Competitive Equilibrium

A market situation where supply equals demand, ensuring no economic profit for firms in perfect competition.

Perfect Complements

Goods that are consumed together in fixed proportions, where the utility derived from consuming the combination is greater than the sum of utilities from consuming the goods separately.