Question

electric vehicles (thousands) gasoline vehicles (thousands)
japan 80 100
korea 70 50
according to the data in the table
a korea should produce both electric vehicles and gasoline vehicles
b korea should produce electric vehicles and japan should produce gasoline vehicles
c korea should produce gasoline vehicles because they have the absolute advantage
d japan should produce gasoline vehicles because they have the absolute advantage
e japan should produce both electric and gasoline vehicles because they have comparative advantage in both

Explanation:

To solve this, we analyze absolute advantage (ability to produce more of a good). For electric vehicles: Japan (80k) vs Korea (70k) – Japan has absolute advantage. For gasoline vehicles: Japan (100k) vs Korea (50k) – Japan has absolute advantage. Now check options:

• Option A: No info on comparative advantage to say Korea should produce both. Eliminate.
• Option B: Korea produces electric? But Japan makes more electric. Eliminate.
• Option C: Korea's gasoline production (50k) is less than Japan's (100k) – no absolute advantage. Eliminate.
• Option D: Japan produces 100k gasoline vs Korea's 50k – absolute advantage. Correct.
• Option E: Comparative advantage (not absolute) determines specialization, and one can't have comparative advantage in both. Eliminate.

Answer:

D. Japan should produce gasoline vehicles because they have the absolute advantage