Answer
a) Please see the screenshot.
b) Please see the graphs.
c) Please see the screenshot for the opportunity costs for each good and each country.
d) Neither country has an absolute advantage in producing cars since both countries take 3 months to make a car. American workers have the absolute advantage in producing grain.
e) American workers have the comparative advantage in making grain, and Japanese workers have the comparative advantage in making cars.
f) America--200 million cars, 500 million tons of grain
Japan--200 million cars, 250 million tons of grain
g) As long as America would be willing to trade at a rate between 1.25 and 2.5 tons of grain per car to Japan, trade would benefit both countries.
Work Step by Step
d) American workers take 1.2 months to produce a ton of grain, compared to Japanese workers' 2.4 months to produce a ton of grain.
e) American workers have the lower opportunity cost for making grain (.4 cars vs Japan's .8 cars), and Japanese workers have the lower opportunity cost for making cars (1.25 tons of grain vs America's 2.5 tons of grain).
f)
America: 100 million workers, split evenly
$50*4=200$ million cars
$50*10= 500$ million tons of grain
Japan: 100 million workers, split evenly
$50*4=200$ million cars
$50*5 = 250$ million tons of grain
g)
The trade would need to be between 1.25 tons of grain (Japan's opportunity cost for a car) and 2.5 tons of grain (America's opportunity cost for a car) for both countries to be made better due to trade.
