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Consider the two production sectors in Japan and in Colombia, motorcycles and speedboats. Without trade, Japan produces 30 million motorcycles and 10 million speedboats in
Consider the two production sectors in Japan and in Colombia, motorcycles and speedboats. Without trade, Japan produces 30 million motorcycles and 10 million speedboats in a year, employing 1 million workers in each of the two sectors. Colombia, with the same labor force, produces 25 million motorcycles and 2.5 million speedboats in a year. Explain that the Japan has an absolute advantage in producing both motorcycles and speed boats. In which of the sectors does Japan have a comparative advantage? Give an numerical example how both could benefit from trading motorcycles for speedboats
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