Answer: Japan has a Comparative Advantage
Explanation:
The country that has a Comparative Advantage in the production of a good is the one that has to give up less of another good to produce it. In other words, it is the country with a lower Opportunity cost.
The United States can either produce 2,000 cars or 2,000 trucks. This means that to produce 1 car the US foregoes;
= 2,000/2,000
= 1 Truck
Japan can either produce 2,000 cars or 1,000 trucks. This means that for every car produced the Japanese forgo;
= 1,000/2,000
= 0.5 trucks.
The Opportunity cost for the Japanese is less for producing cars so they have the comparative advantage.
