Table 3-26
Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate.

-Refer to Table 3-26. 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.

Question

Table 3-26
Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate.
​ 
-Refer to Table 3-26. 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.

Quizplus · Accepted Answer

Before specialization and trade,
Japan had a comparative advantage in producing airplanes (lower opportunity cost of producing airplanes compared to cars) and Korea had a comparative advantage in producing cars (lower opportunity cost of producing cars compared to airplanes).
After specialization and trade,
Japan specialized in producing airplanes and traded 28 cars for 8 airplanes with Korea.
Japan now has 22 cars (original 50 minus traded 28 cars) and 14 airplanes (original 6 plus gained 8 airplanes).
Korea specialized in producing cars and traded 28 cars for 8 airplanes with Japan.
Korea now has 55 cars (original 27 plus gained 28 cars) and 6 airplanes (original 7 minus traded 8 airplanes).
Therefore, Japan gained 8 airplanes and lost 28 cars. The net gain for Japan is -20 cars and +8 airplanes. Korea gained 28 cars and lost 8 airplanes. The net gain for Korea is +28 cars and -8 airplanes. Therefore, the correct answer is B.

Table 3-26 Assume That Japan and Korea Can Switch Between Producing Cars