2. 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 grains a year. To keep things simple, assume that each country has 100 million workers. a. For this situation, construct a table analogous to the table in Figure 1. | Time Needed to Make a Car | Production of Grain | | Time | Production | Time | Production | America | 1 Year | 4 Cars | 1 Year | 10 Tons | Japan | 1Year | 4 Cars | 1 Year | 5 Tons |

b. Graph the productions possibilities frontier of the American and Japanese economies.

c. For the US, what is the opportunity cost of a car? Of grain? For Japan, what is the information in a table analogous to Table 1. For Japan: The Opportunity Cost of a Car is 2 and Grain is 2.5 with no trade. For the US: The opportunity cost of a car is also 2, and grain is 5. Opportunity Cost | | Car Per Year | Grain Per Year | America | 2 | 5 | Japan | 2 | 2.5 |

d. Which country has an absolute advantage in producing cars? In producing Grains? Neither country has an absolute advantage in producing cars, however America has the absolute advantage in producing Grain. e. Which country has comparative advantage in producing cars? In producing grains? US has the comparative advantage in grain, neither in cars. f. US 2 cars, Grain 5 tons, Japan 2 Cars, Grain 2.5 tons g. Without trade neither country will have an advantage. With trade, each country can spare workers to help produce more of the good that needs to be traded. Since US can produce more grain than Japan, they would want to trade grain to Japan for cars, and vice versa with Japan.

4. Consider the following events: Scientists reveal that consumptions of oranges decreases the risk of diabetes, and at the same time, farmers uses a new fertilizer that makes