1. Suppose in Japan a worker can produce either 15 laptops or 30 speakers in 1 day while in Sweden a worker can produce either 5 laptops or 20 speakers.

(a) Which country has an absolute advantage in laptop production? In speakers production?

(b) What is the opportunity cost of 1 laptop in Japan? In Sweden?

(c) Which country has a comparative advantage in laptop production? In speaker production?

(d) Suppose each country has 9,000 workers. Currently, each country devotes 30 percent of its labor force to production of speakers and 70 percent to production of laptops.

i. What are the total outputs of laptops and speakers in each country (before specialization)? What is the world total outputs?

ii. Suppose each country specializes in the production of the good in which it has a comparative advantage. What is the maximum possible outputs of laptops and speakers in each country? Produce a table to display this information. What is the combined total output of laptops and speakers?

Show that each country can gain from trade (consumption gains).

2. Discuss a few different ways that the government can interfere with free trade. Provide a brief commentary on the role of government in globalization (does it do too much? too little?)