American and Japanese workers can each produce 4 cars a year. An American worker can produce 10 tons of grain a year, whereas a Japanese worker can produce 5 tons of grain a year. To keep things simple, assume that each country has 100 million workers. Which country has an absolute advantage in producing cars? In producing grain?
a. U.S in cars; Japan in grain
b. Japan in cars; U.S in grain
c. U.S in cars; U.S in grain
d. Neither in cars; U.S in grain
Answer: d. Neither in cars; U.S in grain
Explanation: Neither country has an absolute advantage in producing cars, because they are equally productive (the same output per worker); the United States has an absolute advantage in producing grain, because it is more productive (greater output per worker)
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