Suppose That Japan and India Are Both Engaged in the Production

question 107

Multiple Choice

Suppose that Japan and India are both engaged in the production of radios and rice, and that Japan has an absolute advantage in the production of both goods. If India has a lower opportunity cost for producing rice, then

• A) India has a comparative advantage in rice production, but there will be no gains from specialization and trade.
• B) Japan has a comparative advantage in the production of both goods.
• C) India has a comparative advantage in the production of rice, but it is outweighed by Japan's absolute advantage in rice production.
• D) India has a comparative advantage in the production of rice, and specialization and trade between the two countries can be mutually beneficial.

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