Suppose the U.S.and Japan can both produce airplanes and televisions and the U.S.has a comparative advantage in the production of airplanes while Japan has a comparative advantage in the production of televisions.Also suppose the U.S.has an absolute advantage in the production of both airplanes and televisions.The U.S.should
A)not trade airplanes or televisions with Japan.
B)import airplanes from Japan and export televisions to Japan.
C)export airplanes to Japan and import televisions from Japan.
D)export both airplanes and televisions to Japan.

Question

Quizplus · Accepted Answer

Even though the U.S. has an absolute advantage in both airplanes and televisions, it is still beneficial to specialize in producing the good in which it has a comparative advantage. By doing so, both countries can benefit from trade. The U.S. can export its surplus airplanes to Japan while importing televisions, and both countries can benefit from this exchange.