Question

Assume that Japan and Korea each has 2400 hours available. Originally, each country divided its time equally between the production of cars and airplanes. Now, each country spends all its time producing the good in which it has a comparative advantage. As a result, the total output of cars increased by a. 80. b. 40. c. 16. d. 64.

Answer 1

Answer: The answer is b

Explanation:

Since 60minutes = 1 hour

2400 ÷ 60

= 40

The total output of cars increased by 40

The law of comparative advantage states that a country will specialise in producing commodities in which the country has greatest comparative advantage. Therefore a country will produce for export those commodities she can produce cheaply than other countries.