To determine what each nation will export and import, we need to compare the opportunity costs of producing each good in both countries.
United States:
- Labor hours to produce an aircraft: 10,000 hours
- Labor hours to produce a shirt: 2 hours
Opportunity cost of producing 1 aircraft in the US:
- In terms of shirts: 10,000 hours / 2 hours per shirt = 5,000 shirts
Opportunity cost of producing 1 shirt in the US:
- In terms of aircraft: 2 hours / 10,000 hours per aircraft = 0.0002 aircraft (or 1 aircraft for every 5,000 shirts)
China:
- Labor hours to produce an aircraft: 40,000 hours
- Labor hours to produce a shirt: 4 hours
Opportunity cost of producing 1 aircraft in China:
- In terms of shirts: 40,000 hours / 4 hours per shirt = 10,000 shirts
Opportunity cost of producing 1 shirt in China:
- In terms of aircraft: 4 hours / 40,000 hours per aircraft = 0.0001 aircraft (or 1 aircraft for every 10,000 shirts)
Comparison of Opportunity Costs:
- In the United States:
- 1 aircraft = 5,000 shirts
- 1 shirt = 0.0002 aircraft
- In China:
- 1 aircraft = 10,000 shirts
- 1 shirt = 0.0001 aircraft
Conclusion:
- The US has a lower opportunity cost for producing aircraft (5,000 shirts compared to 10,000 shirts in China), meaning the US is more efficient at producing aircraft.
- China has a lower opportunity cost for producing shirts (0.0001 aircraft compared to 0.0002 aircraft in the US), meaning China is more efficient at producing shirts.
Thus, the US will export aircraft, and China will export shirts.
The correct answer is: b. China will export shirts, and the United States will export aircraft.
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