Japanese Cars And Usa Case Study

Question #2 Japanese Cars and USA

Both Japanese and American workers can make 4 cars a year. The Japanese workers can make 5 tons of grain per years, an American will produce 10 tons of grain per year. We are going to make it easy and have an assumption that there are 100 million workers for each country.

a) Make a table analogous to the table in Figure 1.

Production per worker per year:

Total production per year for

100 million workers:

Vehicles

Grain in tonnage

Vehicles

Tons of Grain

Japan

4

5

400 million

500 Million

America

4

10

400 million

1 Billion

B.) Graph the American and Japanese economic production possibilities

What is the cost for grain and vehicles in the USA and Japan? Put this in an analogous to table 1. Japan, would be able to produce 4 cars for every 5 tons of grain. The cost of a car at 1.25 (5/4 = 1.25), and the opportunity of a ton of grain at .8 (4/5 = .8).

This was figured out by taking the number of grain produced by each employee, 10 tons, then divided by how many of cars that could be made by the same employee, 4. 10/4 = 2.5. Cost of grain would be the inverted equation, cars per year divided by tons of grain each year, or 4/10 = .4.

a) Which country has an absolute advantage of producing cars and grain?

Unfortunately, both Japan and U.S. don’t have an absolute advantage when making care, both countries approximately make 400 million cars a year. The US is the leader of the two countries with producing grain, we have a larger output per full time worker.

b) Does Japan or the US has a comparative advantage in making cars and grain?