Assume that an American worker can produce 5 cars per year or 10 tons of grain per year, whereas a Japanese worker can produce 15 cars per year or 5 tons of grain per year. Assume for this exercise that labor is the only input used in car and grain production.

a. Which country has the absolute advantage in producing cars? In producing grain?

b. For the United States, what is the opportunity cost of producing a car? What is the opportunity cost of producing a ton of grain? Show how you arrived at your numbers.

c. For Japan, what is the opportunity cost of producing a car? What is the opportunity cost of producing a ton of grain? Show how you arrived at your numbers.

d. If free trade is allowed, which country will import cars? Which country will import grain? Explain.