B. Japan has absolute advantage in producing shoes
United States has absolute advantage in producing shoelaces
United States has comparative advantage in producing shoelaces
Japan has comparative advantage in producing shoes
C. United States will produce 20 pairs of shoelaces and 20 pairs
of shoes
Japan will produce 20 pairs of shoelaces and 20 pairs of shoes
D. If they specialize and trade, the United States could increase
production of shoelaces and Japan could increase production of shoes and
total production would increase.
Initial Production | Shoes | Shoelaces |
United States | 20 | 20 |
Japan | 20 | 20 |
Total | 40 | 40 |
With Specialization and Trade | ||
United States | 19 | 24 |
Japan | 21 | 19.75 |
Total | 40 | 43.75 |