INTERNATIONAL BUSINESS

International Business



International Business

In developing your answer, please define your terms and provide specific examples to support your argument.

Case

1

case

2

case

3

case

4

Japan

Korea

Japan

Korea

Japan

Korea

Japan

Korea

Corn(bushels)

4

1

4

1

4

1

4

2

Wine(bottles)

1

2

3

2

2

2

2

1

Answer1:

The term absolute advantage means that the ability of any country or individual that has the capacity to produce a particular good or service that is in greater number as compared to its competitor while both are using the same and equal source of input. This concept was defined in the framework of international trade and this concept uses only labor force as the only input that is given to generate the product which is absolute product for one country or individual. This helps in comparing of labor productivity as well. If there is no absolute product produce d by any individual or country, then no trade will take place among different countries.

In case 1, Japan has absolute advantage in production of corn which means that Korea will be importing corn from Japan while in production of wine Korea has absolute advantage over Japan which means that Japan will be importing wine from Korea or in other words Japan has absolute advantage in the production of corn and disadvantage in the production of wine while Korea has advantage in the production of wine and disadvantage in the production of corn.

In case 2, Japan has absolute advantage in the production of corn as well as in the production of wine as compared to the output level of Korea or in simple words Japan has absolute advantage in both the commodities while Korea has disadvantage in both the commodities.

In case 3, Japan again has an absolute advantage in the production of corn while in the production of wine, both Japan and Korea are showing equal production which means no trade will take place in case 3 in respect of wine or simply Japan has absolute advantage in the production of corn and Korea has disadvantage in production of corn.

In case 4, Japan again has absolute advantage in the production of corn over Korea which means that Korea will be importing corn from Japan while in production of wine, again Japan has edge over Korea and has absolute advantage over Korea or in simpler terms Japan has absolute advantage in both while Korea has disadvantage in both the commodities.



a. From the table, indicate for each case the commodity in which each country has a comparative advantage or disadvantage.

Answer: In case 1, Japan has comparative advantage over producing corns as compared to Korea as it produces 4 bushels of corn by utilizing one day of labor while Korea has comparative advantage over Japan in the production of wine as it produces 2 bottles of by utilizing one day of labor that is more than the production of Japan so both can trade with each other and can exchange corn with wine. Putting this in simple words, Japan has comparative advantage in the production of corn and disadvantage in the production of wine whereas Korea has advantage in the ...