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| Topic: |
Business
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| Number of pages / Number of words: |
9 / 2500 |
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The comparative advantage for computers, then, would go to Japan because they are more efficient at making them. They produce more computers and give up less than Canada does.
Because Japan has the comparative advantage in producing computers in that example, free trade would maximize both country's production by having Japan specialize in producing computers and Canada specialize in producing cars...
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Then, both countries could trade the products they specialize in for the other, at a fair rate to be determined separately. Without free trade, each country had a bigger limit on what good they could produce. With trade, both countries still have a limit to what the countries can produce, but since they are trading what they are best at producing, they are maximizing the total numbers of goods in the country...
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