State and explain which country has the comparative advantage in producing smart phones.

Question

Table shows the production of smart phones and hybrid cars for Japan and South Korea without international trade. 

Country	Smart phones (units)	Hybrid cars (units)
Japan	90	130
South Korea	60	80

Answer 1

Hi JunHui,

South Korea has the comparative advantage in producing smart phones. If South Korea produces only hybrid cars, producing 80, they will be giving up 60 smartphones (60/80 = .75). If Japan produces only hybrid cars, they [Japan], would be giving up 90 smart phones (90/130 = .69).

Japan gives up less producing only hybrid cars, so they will produce hybrid cars. South Korea will produce smart phones.